Microsoft puts a note on VMWare and Virtualization

Hyper-V, formerly known as “Viridian”, greatly differs from the virtualization product from Microsoft currently marketed as Microsoft Virtual Server in that it uses a hypervisor to provide hardware abstraction services to the OS environment and do resource allocation and partitioning. This differs from products such as Microsoft Virtual Server, VMWare Server and VMWare Workstation, Parallels, Linux KVM, and the recently Sun-acquired Virtualbox from Innotek use a technique known as host-based virtualization in which a host operating system such as Windows or Linux runs a subprocess provided by its native kernel called a Virtual Machine Monitor (VMM) to provide virtualization services such as a virtual CPU, memory and devices to a virtual machine.

A hypervisor, on the other hand, is a thin abstraction layer which boots on the native hardware that performs some of the functions of an OS kernel, but abstracts much of what is needed to run multiple operating systems with their applications on top of it.

The advantages of hypervisor-based virtualization is that it tends to be faster and more enterprise scalable. The disadvantages are that hypervisors tend to be heavily hardware dependent and usually require hardware acceleration, such as Intel’s “VT” or AMD’s “Pacifica” extensions present in the latest Xeon and Opteron chips, such as it is with Hyper-V and Xen-based solutions, and require modified OS kernels and special paravirtualized device drivers to be run in the VM environment to facilitate enhanced I/O and networking performance.

Note: Source taken from ZDNet blog.