Run Physical or Virtual Machines in Windows Server 2008

With the coming of Windows Server 2008 and its embedded virtualization technology, or hypervisor, you need to rethink the way you provide resources and build the datacenter.
With the advent of powerful new 64-bit servers running either WS08 Enterprise or
Datacenter edition, it has now become possible to virtualize almost every server type, with little or no difference in performance, especially if you base your host server builds on Server Core. Users do not see any difference in operation, whether they are on a virtual or physical machine. And with the advent of the new hypervisor built into WS08, the virtualversus-physical process becomes completely transparent. That’s because unlike previous Microsoft virtualization technologies, which actually resided over the top of the operating system, the new hypervisor resides below the operating system level.

In addition, the WS08 hypervisor has a very small footprint and does not need an additional operating system to run. When you install the WS08 Hyper-V role with Server
Core, the hypervisor is installed directory on top of the hardware. An advantage this model gives you is that all system drivers reside in the virtual machine itself, not in the hypervisor.

All the hypervisor does is expose hardware resources to the virtual machine (VM). The VM then loads the appropriate drivers to work with these hardware resources. VMs have better access to the host system’s resources and run with better performance because there are fewer translation layers between them and the actual hardware. To further support the move to the dynamic datacenter, Microsoft has changed the licensing mode for virtual instances of Windows Server. This change was first initiated with WS03 R2. In WS03 R2, running an Enterprise edition version on the host system automatically grants four free virtual machine licenses of WS03 R2 Enterprise edition (EE). Add another WS03 R2 EE license, and you can build four more VMs. On average, organizations will run up to 16 virtual machines on a host server, requiring only four actual licenses of WS03 R2 EE.

Microsoft carries over this licensing model with WS08. The first Enterprise edition license grants one license for the host and four licenses for VMs. Each other license grants four more licenses for VMs. If you purchase the WS08 Datacenter edition, you can run an unlimited number of VMs on that host. Remember also that the licenses for VMs support any version of Windows Server. This means you can run Windows NT, Windows 2000, or Windows Server 2003, as well as WS08. Virtualization provides great savings and decreases general server provisioning timelines, as well as reducing management overhead. For example, one system administrator can manage well over 100 virtualized servers, as well as the hosts required to run them.

Source of Information : McGraw Hill Microsoft Windows Server 2008 The Complete Reference