Windows 7: Virtual desktop in 7...

Dexpot works in Win 7. I'm delighted to hear that Virtual Dimension still works too. I've used that one a lot too.
Dexpot has nice features including password protection for specific desktops.

Dexpot - Das Utility für virtuelle Desktops

So I found this forum upon searching for Windows 7 virtual desktop managers and decided to try this (Desktops) which is from Microsoft and says it will run on Windows XP and higher and it works perfectly!

Dexpot 1.5 – The utility for virtual desktops
It’s fantastic and worth more than a try.
I would have never imagined that I can find such a powerful multi desktop app.

Pros:
- Favorably integrated with Windows 7.
- Fully customizable.
- Nice performance.
- Almost a fully featured multi desktop app.
- Free of charge for private use
- Compatible with Windows 2000/XP/2003/Vista/2008/7 (incl. x64).

Cons:
- I could not find any way to move a window from a desktop to other in full screen desktop mode like Mac OS X Leopard (although it has this functionality in desktop preview mode which is a bit demanding).
However for the best situation do customize it and enjoy it.. It’s straight forward.

With thanks to Johngolt’s useful post:

Unless I misunderstand what you are asking, you can move items between desktops in Dexpot by right-clicking on the Window title bar, or you can set up hotkeys via settings/contols/move windows.

try this

Desktops

from microsoft

tested:
its smaller than word document (63kb)

up to 4 desktops.. I dunno but it disables aero on the other 3. but you might be able turn it on though.

uses 1mb of RAM. WTF?

it works with Windows 7!

and its from MS! XD

and oh its free

oh wait.. it has been posted already my bad XD

Oops, you are right Henryg thank you. So let me correct myself:
The only failure of Dexpot is the lack of easy drag and drop functionality for moving a window from a desktop to others unlike Mac OS X in which you can easily drag your window, move and drop it anywhere in to another desktop you want. Therefore you have to do it in more steps and clicks.
However, this is ignorable and it doesn’t diminish worthiness of Dexpot in Windows OS.

This can also be done easily via "Desktop Preview". I have it visible most of the time, and also available via hot-key (it is a flip-flop).

Dexpot has many features, and it takes time to set it up exactly as desired, but it is worth the effort. And don't miss the rules feature!

I haven't come across a better VDM.

The best one i have used is called Deskspace. If anyone uses the Desktop Cube feature in Ubuntu, it is exactly like that. Only problem is Deskspace isnt free, but they offer a trial on their website so its worth a try. goodluck

Screenshot

link to a screenshot

The bad thing about Desktops is that even though "desktops" only uses 1mb of RAM, it uses 4 instances of Explorer (and thus "explorer uses it's full amount of RAM for each desktop, which can get quite high depending on how much you have open..)... meaning, absolutely no way to move windows b/w desktops, among other major caveats...

Just my 2 cents... I just installed Despot and it seems to have all of the customization i was looking for in a simple to use interface...

Microsoft doe offer a virtual desktop solution. It's called "Desktops" by Microsoft Sysinternals team:

Desktops