http://www.microsoft.com/hyper-v

Many people on our team (including myself, of course) have been running pre-RTM bits (the beta that came with Windows Server 2008, RC0, RC1, and their escrow build), and we've been extremely happy with it.  It's light-years ahead of Virtual PC / Virtual Server.  I've already consolidated 4 of my previous machines down to 1 physical box, including the machines I do all my day-to-day development (now a VM of 4 procs and 2GB) and testing (now a VM of 2 procs and 1GB) with.

As I've been telling my co-workers who ask whether they should use it or not: it's ridiculously good.  If you have WS08, do yourself a favor and get it, use it - LOVE IT!