Windows 7 and Windows XP Mode (XPM)
Windows XPM is an interesting feature for Windows 7, it allows Windows XP applications to run under the same desktop with Windows 7. Unfortunately, Not all PC’s will support the new Windows XP Mode under Windows 7. The processor must support a feature called “hardware virtualization”, which is not supported in many Intel & AMD processors. In addition, even if your CPU does support hardware virtualization, your BIOS must also support it. If you have an older bios that can’t be updated and a chip that does support hardware virtualization, you’ll still be out of luck in using Windows XPM in Windows 7.
UPDATE: Microsoft has released an update for Windows XP Mode to allow for compatibility with processors without hardware virtualization. For best performance, Microsoft recommended a hardware virtualization CPU.
Although OEMs have been shipping hardware virtualization in PCs for three years, hardware virtualization is not available in all PCs — so even if your PC is new, it may not have hardware virtualization. Additionally, those PCs with hardware virtualization have it turned off by default, so you will need to turn on the hardware virtualization capability before you can use it.
More info on Microsoft’s site:
A download tool is available to test your processor for both Intel and AMD. Please see Microsoft’s site for download links.
Tom’s Hardware has a good article on this:
Ed Bott’s compiled a list of processors with the VT support.
Core 2 Duo
Core 2 Extreme
Core 2 Quad
Core i7/Core i7 Extreme
Pentium D/Pentium EE
Pentium for Desktop
Mobile CPU products
Core 2 Duo Mobile
Core 2 Extreme Mobile
Core 2 Quad Mobile
Core 2 Solo