I love VPC for development. Not only can you create complex, isolated test beds that are identitical to your deployment arena, but you can also do your development INSIDE the virtual environment.

This is a consultant's dream. You can take your complete dev environment with you on a portable harddrive. Your host machine crashes? Move to a second machine and you are good to go immediately. Need to reinstall the OS? You are good to start developing again as soon as the OS and VPC are installed.

Backups can include your complete dev environment, even all the tools.

The only caveat is if you plan to start working on Vista's glass & WinFX, VPC doesn't emulate a sophisticated enough graphics card to support it, but that is still a ways away for most of us.

Mirosoft now allows free redistribution of Virtual Server and Virtual PC.

Read more here.

I can only agree. I have been using VMware for development, testing and even some deployment for a long time and it has changed the way I work. Want to try some new tool or Delphi component but are afraid they might mess up the work environment? No problem, just take a snapshot. If you don't like it, you can always revert. Want to always start testing your app in a predefined environment, without any garbage left over from previous installations? No problem, just go back to a snapshot of a clean install. I don't know what I did before there was VMware, I just refuse to remember. ;-)