Microsoft Details Windows 7 XP Mode Requirements
Now that Microsoft has caught everyone's attention with Windows 7's ability to run in XP Mode, they have shed a little light on what it will take to utilize the feature.

To enable XP Mode, users will be required to have a minimum of 2GB RAM, an Intel or AMD processor that has true chip-level virtualization, and a licensed copy of Windows XP SP3. Interestingly enough, Microsoft doesn't seem to have packaged XP Mode with Windows 7 and it will be a free downlod for those with the Professional, Enterprise, and Ultimate versions.
All seems very straightforward except the virtualization part. According to Microsoft's Scott Woodgate, "Some PCs have [chip-level virtualization] and some don't. It's not as clear as it should be relative to which PCs have support and which don't." Hopefully, they will release a tester program along with Windows 7.
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