Windows 7 (as of RC1) now supports a pretty spiffy new feature known as Virtual Windows XP or Windows XP Mode based on what article you read. At its core, it is a new version of the Virtual PC product, now named Windows Virtual PC, installed closer to the OS, combined with a Windows XP hard disk image which allow you to run legacy applications under Windows XP on your Windows 7 machine in a pretty seamless way.
If you install the Windows Virtual PC add-on to Windows 7, you must first uninstall Virtual PC 2007. By doing that, you remove the special network driver that is also required to use the Microsoft Device Emulator on the network. The device emulator is