Ioannis Vranos wrote:
"Virtualization licensing
One final area that's come under a lot of scrutiny--and, as it turns out, misguided interpretations--regards virtualization. With Windows Vista, Microsoft is finally addressing virtualization in the EULA. And it goes something like this:
Any version of Windows Vista can host virtual machines (VMs), whether in Microsoft's Virtual PC solution or a rival product like VMWare Workstation. However, only two retail version of Windows Vista are licensed for use as a guest OS in a VM: Windows Vista Business and Ultimate. (A third--non-retail--Vista version, Vista Enterprise, has different licensing terms, which I'll address in a bit.)
Let that one sink in for a second. You cannot install Windows Vista Home Basic or Home Premium in a virtual machine, at least from a legal standpoint. (There is nothing technical preventing you from doing so, of course.) And on a related note, each retail copy of Vista you purchase is only licensable for one install. If you install a copy of Windows Vista in a virtual machine and then activate it, you cannot install the same copy of Vista on a physical machine and reactivate it (unless you take advantage of the transfer rights mentioned above, of course). One license equals one installation.
So why "restrict" users like that? Well, as it turns out, there's no massive conspiracy. Currently, the majority of Microsoft's virtualization users fall into exactly two groups: business customers and enthusiasts. Business customers will want Vista Business and enthusiasts will use Vista Ultimate. Simple. And though pundits might like to complain about this apparently arbitrary decision, the reality is that very, very few people can ever come up with a legitimate reason to run, say, Vista Home Basic in a VM. And those that want to, can, if they don't mind violating the Vista EULA and not receiving support.
Windows Vista Enterprise is a special case. With that version of Vista, which will be made available only to volume license customers, users will be able to install a single licensed copy of Vista on one physical PC and up to four VMs, simultaneously. Those four VMs, however, must all be installed on the same Vista Enterprise-based PC, and they must be used by the same user. "If customers need multiple virtual machines they should use Vista Enterprise," Microsoft's Scott Woodgate told me. "The intention is to be generous and enable whatever scenarios are customers may need." Sounds like a customer benefit to me."
Conclusion: "You cannot install Windows Vista Home Basic or Home Premium in a virtual machine, at least from a legal standpoint".
Some more links on this:
http://www.theregister.co.uk/2006/10/29/microsoft_vista_eula_analysis/page2....
http://www.google.gr/search?q=microsoft+vista+vmware+license&start=0&...
I haven't researched the entire mess thoroughly but you get the picture, you will need a lawyer if you use vmware & windows. :-)