From an interesting InformationWeek piece

Microsoft’s mistakes in Vista’s development have been well-chronicled, and the company’s leaders recognize that another five-year gap between major updates of their money maker could be disastrous. In July, chief executive Steve Ballmer told financial analysts “we will never repeat our experience with Windows Vista, we will never have a five-year gap between major releases of flagship products.”

But exactly how will Microsoft do this? How can it handle the increasingly unwieldy amount of code in Windows, better secure the operating system, and maintain backward compatibility with the legions of legacy applications? Gartner’s Gammage and two colleagues, Michael Silver and David Mitchell Smith, believe they know.

“Microsoft will have to move toward virtualization at its core to change direction,” said Gammage. “We think this is what will happen. Microsoft, at the moment, disagrees with us.

“But we don’t see another way of doing this.”

In the scheme that Gammage sees playing out, Microsoft will be forced into adding a “hypervisor,” a layer of virtualization software that runs between the operating system and hardware, to Vista by no later than 2009. Virtualization-enabled processors and chipsets, such as the newer offerings from both Intel and AMD, allow hypervisors to run, which in turn let developers separate functions of an OS into chunks, then have those pieces run simultaneously in multiple virtual machine partitions.

“We expect this hypervisor to provide the key enabling technology for reversing the trend in functional integration,” wrote Gammage, Silver, and Smith in a research report they issued nearly two weeks ago.

“This is how Microsoft will be able to deal with 25 years of backward compatibility,” Gammage said. Virtualization, he said will allow a future Windows to run the legacy kernel — to support aged applications — alongside a new kernel, just as current virtual machine technologies let users run different operating systems side-by-side…

Anyone wondering why Xensource is going to be such a Big Deal need look no further. They’ve cracked the hypervisor problem. And the delicious irony is that their core technology is open source!