A. MED-V is the component of the Microsoft Desktop Optimization Pack (MDOP) that enables centralized management of virtual images that are run locally on client desktops. These images are used for running legacy applications or system components on newer desktop OSs.
For example, it's common to use MED-V to manage a Windows XP image. The process includes deploying the Virtual Hard Disk (VHD), updating the VHD, and setting shortcuts on the desktop on a Windows 7 OS. Inside the Windows XP VM, you'd run applications that won't run on Windows 7.
If your organization needs Internet Explorer (IE) 6, you could also use MED-V to configure URLs that should be redirected to the IE inside the XP image when entered by the user. This URL redirection means a user doesn't have to select IE6 from the XP VM—the MED-V components see the URL and automatically redirect it, per defined policy.
The great part with MED-V is that the applications running in XP aren't displayed on a separate XP desktop—the application windows are displayed on the main Windows 7 desktop, which means the user is unaware of the XP VM and just runs applications as usual.
As I said, the MED-V component is normally used on Windows 7 (and Vista) desktops to deploy and manage an XP VM for legacy applications and sites. However, MED-V is supported on Windows XP if you need that functionality. For example, maybe your organization is still on XP and deployed IE8, but you need IE6 for a few sites. With MED-V, you'd have an XP VM containing IE 6 that would be used automatically for certain URLs.
For XP support, SP2 or SP3 must be installed and you must be using an x86 architecture. For a full list of supported configurations, see this Microsoft site.