Virtual machine can also refer to a way of running several OSes fully simultaneously on the same hardware. You use this feature often to test out new releases of your main OS, or to experiment with other OSes such as Linux, 64-bit versions or to test your software on older OSes such as Win2K and XP, or to run legacy software that only runs on older OSes.
Microsoft provides free software called Virtual PC 2007 to do virtualisation. It even lets you drag and drop to copy files between different OSes running in different windows on your desktop.
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