Robert L. Mitchel wrote an interesting article about the virtualization technology in Windows Server Longhorn. I've read several times that Longhorn will come with its own hypervisor, which always confused me. I didn't understand how a typical guest operating system can have a hypervisor because I thought a hypervisor is just some kind of an OS.
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For me, a hypervisor was just a piece for software that runs directly on hardware partitioning CPUs, memory, etc. for guest operating systems. The only difference to a typical OS is that it runs other operating systems instead of applications. Well, I just learned that this only is half the truth.
Longhorn's hypervisor still needs an instance of Windows Server running in the parent partition. However, Windows Server will run "on top" rather than underneath of the hypervisor. This basically seems to mean that the hypervisor just utilizes the device drivers of Windows Server. If I understand it right, then this is what is meant by the term "built-in-hypervisor".
I also recommend reading the third comment of the article. An anonymous reader goes into more details there. If what "she" says is correct, then VMware ESX Server works in a similar way, just that it runs a light version of Red Hat Linux in the parent partition. This is similar to Longhorn's hypervisor as it only needs Server Core which can also be considered as a light version of Windows Server Longhorn.