Windows 7: XP Mode for Older Hardware

Help me if I misunderstand XP mode. It would seem the case for buying windows 7 with XP is to support older hardware and software that is not yet compatible.

However, you have to have a bios and cpu which support virtualization which are only the new hardware/cpu's.

XP mode would be most suitable for older hardware running XP machines.

What am I missing or don't understand?

your understanding is correct, and I think your reasoning is correct too, i.e., most people who wants to run XPM might be those upgrading from xp machine.

Unfortunately, the new hardware requirement from XPM is due to a core technique reason. The virtual pc virtual machine monitor (vpcvmm.sys) does NOT work at all if VT-x or AMD-v are not present. VT-x/AMD-v are cpu- assisted virtualization, with them, supporting virtual machines is much much easier.

This is one of the reasons we are releasing VMLite, which allows XPM to run on old hardware, more info can be found here:

http://www.vmlite.com