VMware and Microsoft have been providing many alternatives to host VMs at no charge and if you are a newcomer to virtual machines it may be a good idea to reflect on the benefits of each product before installing it.
It seems VMware was actually first to provide these virtualization systems and now offers its systems at no charge as well, but Microsoft has joined the party and offers some strong alternatives.
Hyper-V is a main competitor and challenges VMware because it allows for more reliable hot backups to be taken using Microsoft's Volume Shadow Service. So if you are a professional and want to run VMs without interruption, Microsoft may be the answer for you.
Beginners who want to play with Linux, Microsoft made a home version called Virtual PC which works under XP and above and can be installed from Microsoft's Download Center.
Virtual PC doesn't impress with as many features, but it allows users who run Windows 7 to start their ancient utilities directly on their desktop. You actually view your old app inside a Windows 7 window, as if it is running on your own PC! Those who are used to relying on remote desktop or VNC to see their VM's desktop are very happy about this new feature, but it is only available under Windows 7.
Virtual PC is outdated from today's perspective. Virtual Server is somewhat more advanced and provides a website for admins to create and monitor multiple VMs concurrently. It also gives you a 64-bit emulation, which isn't available Microsoft Virtual PC.
A shortcoming of virtual PC and Virtual Server is their single CPU core limitation. Previously VMware was ahead of the game and already had technology to utilize all CPU cores and processors.
In the meantime, Microsoft has advanced its own VM kernel to compete with VMware and now also has this feature built-in Hyper-V Server.
Unlike all other systems, in Hyper-V you can install a VM exclusively to a physical drive and skip VHD files altogether. For that reason there is no need to have these sluggish VHD files anymore if you don't want to. Think about how much faster the VM can access the hard drive using direct RAW disk operations!
Raw disk access is a major speed factor and needs to be chosen when you have either many VMs on one server or very data-intensive VMs.
It is true that Hyper-V is capable but it has a problem as well: it must be installed on Windows Server 2008 or the cheap variant Hyper-V Server 2008. The latter is free of charge but you need to put it on a partition of its own.
VMware, is the most flexible of most virtualization solutions and runs on all OSes. It isn't as good with backups and it's UI is rather slow. Backup software are available for these two platforms.
So, if you want power go for VMware; if you want plug-and-play go for Virtual PC; Virtual Server is OK for medium performance, and VMware's main competitor is basically Hyper-V.