Download Windows Virtual PC from Microsoft Download Centre. You may also get readily available Windows XP virtual PC to run along.
Select your OS type and language for Windows XP Mode.
Save the file and open to install this as Windows Update on you Windows 7 PC
You must restart after installation is over.
After Windows is restarted you can find the Windows Virtual PC in StartMenu –> All Programs-> Windows Virtual PC
To create new Virtual Machine select Create Virtual Machine from the explorer toolbar as shown in the following picture.
If you see the following dialog, your system may not support Hardware assisted virtualization or Virtualization may not be enabled at BIOS
After you are done, you can retry
Make sure you have inserted the Windows OS disk and start the newly created VM
You are done !!