I'm writing this from a Windows 7 computer. It's running on Sun's VirtualBox, a free, open-source virtualization product that is installed on my Vista box. I can put Vbox into fullscreen mode, and then there's no hint that it's running on a virtual box. It looks and feels like you have a pc with Win7 installed. Or... I can put Vbox into seamless mode, and then I'm back at my Vista desktop, but I can still run Win7 apps and they appear on my desktop as if they were Vista apps. Pretty cool.
I tried using the Microsoft Virtual PC 2007, and it did work, but I think the Sun product works better, and it definitely gives me access to more of the physical machine's resources. Sun's Vbox required me to go into the BIOS and enable the iVT setting (Intel Virtualization Technology®) before I could successfully install Vbox. Windows 7 is a free download from Microsoft until August 2009. It expires in July 2010, but until then it's a free preview of Microsoft's next OS.
I just tried to upload a screenshot - and totally forgot that the pictures are on my "real" computer. That's how good the illusion is. I'll publish what I have and switch back to the real computer where my photos are located. (Back in Vista now.) This is my Windows 7 desktop before I began installing applications. (Click image to enlarge.)
(Back in Windows 7.) Now, check this out. I wanted to post a picture of the Windows 7 desktop in fullscreen mode. So I went back to Windows 7, put it in fullscreen mode, hit "Print Scrn", opened Paint, hit Ctrl-V, saved the image to my Win7 pictures folder, started up Firefox and now I'm writing from Win7 again. Here's the desktop in fullscreen mode. (You'll notice I've added a few icons to the desktop.) Notice, also, the desktop is no longer in a "box" as in the above photo. There's no way to know that this Windows 7 desktop is really just a process running on a Vista machine.