What's the big deal about the Windows 7 "XP Mode"?

The news from Redmond that some editions of Windows 7 are to include a feature called XP Mode has caused quite a stir. Maybe I'm missing something, but I just can't see why this is a big deal.

Let's examine what we know here. I've not used XP Mode yet (anyone out there who can change this for me, let me know) but the technology seems to be based on Virtual PC technology. There are some tweaks, for example, the way that applications that are installed into the XP VM are also added to the Windows 7 Start Menu. Sure, a neat feature, but what's the real difference here between XP Mode and the way I can run XP, along with dozens of other OSes, using VMware, Virtual PC or a whole host of other apps.

Also, how different is this to Parallels on the Mac? Or VirtualBox on Linux?

Equally, the feature that seems to allow apps to run outside of the traditional OS window is nothing new (think Unity in VMware or Coherence in Parallels). Sure, it's new to Microsoft, but ... well, need I say more?

Here's what doesn't make sense to me. A number of commentators are saying that XP Mode is a tool to end compatibility for businesses and power users (it seems that folks running lowly editions of Windows 7 won't see XP Mode). But if that was the case, why haven't companies solved this problem by leveraging virtualization already? Additionally, if a business didn't move on to Windows 7 because it was too tied to XP, and that company didn't get around to solve those issues, either through virtualization or by upgrading software, then isn't it easier to continue to stick with XP and not move to Windows 7? Or move to Mac/Linus and just virtualize XP?

Another problem I see with XP Mode is that it's prolonging the inevitable. If it isn't possible to run XP apps in Windows 7 (or later) in a way that safe, secure and compatible, without running XP, then XP Mode is merely delaying the inevitable.

Oh, and remember that this is only a software patch. If your CPU doesn't support virtualization, you're stuck. It's also worth bearing in mind that virtualization isn't suited to low-specced systems.

Don't get me wrong, XP Mode sounds cool, but let's not get carried away here and pretend that there's anything really new here. If this had been released for Vista a few years ago, things might have been different, but releasing this for Windows 7 seems to me like too little, too late.

[UPDATE: It seems that I'm not alone in not getting all the fuss surrounding XP Mode. Ed Bott feels the same way. Ed has, however, said something interesting:

"Don’t get me wrong, I think delivering XP Mode is a smart idea on Microsoft’s part. The real news is that it actually provides a licensed copy of XP SP3 and distributes it in a prepackaged VHD format. That removes the cost of the extra license and the hassle of setting up virtualization software."

While I don't see XP Mode as removing much of the hassle of running a second virtualized OS (after all, you still need to set it up) the part about how you get a copy of XP wrapped up in VHD format is ... because it shifts XP Mode away from being about compatibility and makes it a tool that Microsoft will use against other vendors providing virtualization software. However, because XP Mode isn't embedded into the OS and is a separate download, Microsoft dodges any antitrust bullets that might be headed its way.]

[UPDATE #2: Interesting thought - Is Microsoft finally coming round to the conclusion that we should be allowed to virtualize older copies of Windows for free on the desktop?]

[UPDATE #3: Also, what about security? How much of a headache is administering two operating systems going to be? How much hassle will two lots of Windows Updates be? Will Microsoft give admins tools to make patching and deployment easier?]