Q: What does the VM mode option do in Windows 8 SYSPREP?

A: SYSPREP is used to prepare an OS for duplication, whether for physical desktops or as part of a virtual desktop infrastructure (VDI) environment.

Windows 8 introduces a /mode:vm switch, which should be used when preparing a Windows 8 virtual machine (VM) that is being used as part of a VDI deployment. When SYSPREP runs, it performs several actions, including removing unique information such as the SID and GUID; but it also resets the hardware information.

In a VDI environment where all the duplicates are running on the same hypervisor as the source VM, there's no need to reset the hardware information because this is what the /mode:vm switch enables, speeding up the startup of the duplicates on first boot.

You might also take a look at "Windows 8 Client Virtualization" for more information about this topic.