Windows 7 in Windows XP Mode

Microsoft’s new Windows XP Mode requires hardware virtualization, which is probably one of the more confusing parts to knowing if your computer can support XPM. If you’re not sure what XPM is, check out our screenshot tour here.

Hardware Requirements:

The hardware requirements are essentially the same as Windows 7′s minimum requirements, with two exceptions:
CPU: Your CPU must support Hardware Virtualization.
RAM: Instead of a 1GB minimum, Microsoft recommends 2GBs of RAM

How to check if your CPU supports Hardware Virtualization:

You can use tools issued by the hardware manufacturer to check if your processor supports hardware virtualization. You may heard from elsewhere that Securable can be used to check for Hardware-VT, but this post from Neowin shows that Securable is not always correct.
Intel:
1) Download and install the Intel Processor Identification Utility. Run the Utility, click on the CPU Technologies tab and check to see if it says yes beside Intel(R) Virtualization Technology.
Windows 7 and Windows XP Mode: Can you run it?
2) You can use the Processor Spec Finder if you know the make of your CPU. Simply type in your Processor Number in the second Search box or select a processor family from the drop-down box and find your CPU in the list. I have an Intel Core2Duo e6750 so I’d type in e6750. Once you’ve clicked on your processor, look for Intel® Virtualization Technology  under Supported Features.
AMD:
1) Simply download and run the AMD Virtualization Compatibility Utility to check for virtualization support.

Enabling Hardware Virtualization in the BIOS:

Update: Microsoft has provided step-by-step instructions on how to do this with Dell, HP, and Lenovo Thinkpad Systems. Click here for the instructions.
Dell systems:
  • Depress the F12 key when boot menu text appears at startup
  • Select BIOS setup and depress the Enter key
  • Using the mouse, expand the Virtualization Support menu item by clicking on the plus to the left of Virtualization Support and select Virtualization
  • Check the Enable Intel Virtualization Technology checkbox
  • Click Apply
  • Click Exit
  • Fully shut down (power off), wait a few seconds, and restart your computer
If you attempt to install Windows XP Mode and you are still unable to solve it despite the fact that your processor supports virtualization,  then you may have to enable it in the BIOS.
The problem is that the instructions for enabling hardware virtualization are specific for each OEM and there is no set-in-stone method for enabling Virtualization in the BIOS. You would have to Google it or ask your manufacturer.
Read this warning:
If you don’t understand what you are changing, DO NOT change it. If you’re not confident in configuring your BIOS settings, DO NOT configure. As a final word of warning, if you are at any time unsure about a setting, DO NOT change it. If you mistakenly touch a setting that you shouldn’t have touched, it may have drastic consequences on your computer. If you are unsure, seek for help from your computer vendor (Dell,Gateway,HP,etc)
Windows 7 and Windows XP Mode: Can you run it?
When you see the above screen, you have to press a specific key to enter Setup. As indicated by the red box, instructions for entering Setup are usually located at the bottom of the screen when you first turn on your computer. Just hit that key and you should enter Setup. Hardware Virtualization can be enabled from Setup. After configuring, Save and Exit is required for settings to take into effect.

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