Microsoft is planning a new virtualisation tool to provide better application compatibility for businesses migrating from Windows XP to the forthcoming Windows 7 operating system.

The feature will be called Windows XP Mode and will allow users to install and run applications in a Windows XP environment running under Windows Virtual PC.

It is specifically designed to help small businesses move to Windows 7, according to information recently posted to Microsoft's Windows blog.

In the blog entry, Microsoft said a beta of Windows XP Mode and Windows Virtual PC is coming in the near future, but will run only on Windows 7 Professional and Windows 7 Ultimate editions.

Microsoft had not responded to requests for further information at the time of writing, so it is not clear whether customers would require an additional licence to cover the XP environment or whether this would be included.

The company already offers a similar tool for larger companies with enterprise licence agreements. Microsoft Enterprise Desktop Virtualisation, part of the Microsoft Desktop Optimization Pack, enables customers to run legacy applications under Windows Vista.

Although running inside a virtual machine, this is hidden from the user who just launches and uses such applications as normal.