Virtual PC 2007 is a great application for developers who
want to have multiple OS in one physical machine. This application gives you a
lot of capability to run an OS as a host (like Win XP) and several OS (like Win 2003, Win
2000, Win 98, etc) at the same time. One of the best features that I really
enjoyed is that you can drag and drop from your host windows to other OS back
and forth. Virtual PC gives the ability to have several IP addresses from a
physical machine and a developer easily can test his/her applications on
different operation systems in order to debug the application. You can
download
the VPC 2007(30.4 MB) from Microsoft download center and follow the following instructions
to install the VPC on your desire OS.
After easy installation, you will see a wizard that can help
you to setup the new OS. In this post, I want to install Win 2003 as a guest (secondary
OS).

Click the next button,

Check the Create a virtual machine and
click Next button,

Insert the name of OS, for
example, Win 2003 and click the browse to button to specify the physical
location on hard drive. You can create a folder like Win2003 on the C: drive,
Click open,
VPC automatically show you
the recommended memory but you can change it to other sizes, just remember to
have enough RAM on your host OS. (256 MB would be enough)
Click the A new virtual hard
disk to creat a virtual hard disk:

Now we have to specify the
size of virtual hard disk, VPC chooses 65536MB for Win2003, but you can change it
to higher size.
A simple confirmation message
and you are almost done!
After configuring the virtual
hard disk and memory size you will see the following figure: (I installed two
Win 2003 on my system)

Choose the Win2003(or the name
of your OS that you given in wizard) from the list and hit the Start. Before
you hit the Start button, just make sure to insert the Windows 2003 installation
CD in DVD drive. If the installation process did not start, click the Action and
select Reset (you can use Right Alt + R too) to restart the boot sequence.
A black screen with some boot information will show up shortly and then you should see the welcome
screen after awhile and you are all set.
Hope it helps.