So it seams it isn’t a secret anymore that Windoyws 7 will get a feature (separate download) that using the latest Virtual PC technologies will make it possible to run applications in Windows XP directly integreated into the Windows 7 operating system. The feature is almost the same as MED-V which accomplishes basically the same thing, but The “Windows XP mode” has advantages like it is available for anyone running Windows 7 Professional, Enterprise or Ultimate SKUs.
With this Microsoft can guarantee compatilibty in a way no one could ever expect. This also makes the step from Windows XP to Windows 7 much easier and now there cannot be any apps holiding anyone back from upgrading the clients to Windows 7.
More information: Winsupersite