Networking in Virtual PC and Virtual Server
Virtualization is one of the most promising computer technologies today. According to many experts, virtualization technologies possess a huge potential and enter Top Three of the fastest growing ones. Many manufacturers (both software and hardware) make sure their products support virtualization. There is nothing surprising about that: leading IT analysts predict that half of all computer systems will be virtual by 2015. Special attention is presently paid to OS virtualization, both in terms of virtualization of the enterprise server infrastructure as well as in terms of desktop virtualization. A virtual server infrastructure possesses much higher capacities than the real one: it's more flexible, and it has many tools to provide high availability, and it's much easier to administrate and deploy. Desktop systems are virtualized for various user tasks: from creating secure virtual environments (to isolate software) to portable virtual machines (to be used in the office and at home).
Microsoft certainly couldn't ignore virtualization technologies in both aspects. Back in 2003 the company bought Connectix with its Virtual PC. That's how Microsoft virtualization history started.
At that time it was not clear how virtualization could allow to use computer systems more efficiently. So Microsoft did not give high priority to Connectix Virtual PC. It just launched Virtual PC 2004, while VMware was aggressively promoting its VMware Workstation. The time showed that virtualization was of great interest to home and corporate users. So Microsoft had to catch up with VMware, which had staked much on virtualization. Having launched Virtual Server 2005, based on Virtual PC, Microsoft righted itself in the eyes of users. However, Standard and Enterprise editions of Virtual Server were not free of charge, so they were not of much interest. Virtual Server 2005 R2 was released in 2006. Microsoft had to make it free, because VMware announced free VMware Server for the SMB sector (Small and Medium Business), which features surpassed those of Virtual Server.
Both companies are presently working on powerful tools to manage virtualization servers, which will determine efficiency of a virtual infrastructure in general. Not long ago Microsoft released the first service pack for Virtual Server R2, which allowed to seriously consider this product for using in industrial environments. Virtual PC 2007 was released in 2007 - a noticeably faster desktop virtualization platform with Windows Vista support.
In the light of quick growth of hardware capacities, home users often support several concurrent virtual systems joined in LAN for various experiments as well as safe Internet operations. Maintaining a virtual network on the Virtual Server platform is one of the key tasks of system administrators as they deploy a virtual infrastructure. This article will give you all details about configuring networks on Microsoft virtualization platforms.
Organizing Virtual Networks on Microsoft Virtualization Platforms
When several virtual machines are running on a single physical computer concurrently, you have to configure networking between guest and host operating systems depending on their tasks. These are basic usage scenarios of virtual networks on a virtualization platform:
- creating a virtual machine, which network adapter is shared with a physical network card - as a result, a virtual machine acts as an independent computer in the extranet
- creating isolated networks with several virtual machines in order to test software, to train personnel, and to use linked servers within an intranet
- working with a virtual machine in an extranet, when you need only connections initiated by this virtual machine to the extranet
Microsoft virtualization platforms offer a networking type for each option.
Virtual Networking
Microsoft offers this network type to let a virtual machine provide services to an extranet (relative to the host system). In this case a virtual machine acts as an independent computer in a network with the host computer. If there is a DHCP server in the network (Dynamic Host Configuration Protocol) to assign IP addresses, a virtual machine will get it and will work as an independent system in the network (otherwise, you will have to specify an external IP manually). Here is a diagram of this networking type:

Virtual Networking diagram
This networking type is assigned to a virtual machine by default, because it fits most usage scenarios. This virtual networking type also connects a host system with guest operating systems.
Local Only Networking
This networking type allows to join several virtual machines into an isolated network within a host system, so that components of the external network (relative to the host system) do not have access to them. Here is the diagram:

Local Only Networking Diagram
This networking type does not allow virtual machines to interact with the host system.
Shared Network with NAT (Network Address Translation)
Security is one of the most important issues to be taken into account as you plan to use virtual machines in extranets. If a virtual machine is created only to let users and software work with services in extranet without granting its services to the extranet, Shared Networking will be an ideal choice.

NAT Networking Diagram
In this case a host operating system has a DHCP server, which assigns internal IP addresses to virtual machines within the host network. A virtual machine can initiate a connection to extranet with a special service (Network Address Translator) that translates IP addresses. In this case virtual machines use a single IP address of the host system (Shared IP), and they are not visible to extranet.