I always thought about writing a post about physical-to-virtual migration strategies in combination with VSS, but I never got to it. So it's not surprising that others started to uncover this trail :-)

One particular technique in this area is described in Lindsay Donaghe's blog - she uses NTBackup to do pretty much the following:
1) Backup the physical machine (Windows XP, or something similar). It is important that the backup is done using the ASR mode (Automated System Recovery) because the virtual machine hardware will be different.
2) Create a virtual machine. She uses VMWare but you can use Virtual PC as well.
3) Perform an ASR restore on the newly-created machine. Done!

I would add one more thing. The technique is also useful as a testing procedure to verify that your ASR backup can be actually used to perform a restore. Otherwise, an untested backup is a useless backup, as Murphy would say...