Windows 7's XP Mode feature seamlessly runs your older applications in a virtualised Windows XP behind the scenes, but if you're using the Home edition, you're out of luck. Here's how to create your own XP Mode for any version.
Over at How-To Geek (my home away from Lifehacker), writer Matthew covers how to use VMWare Player's Unity feature to create a seamless virtual machine that runs applications alongside your primary OS — and it works for any version of Windows. The guide steps through installing Windows XP in a virtual machine, configuring Unity and related settings, and even how to map your documents folders so the virtualised XP applications will use the same folders as your primary OS.
If you're using the Professional or Ultimate version of Windows 7 and your PC supports hardware virtualisation, you can check out our guide to setting up and using the official XP Mode in Windows 7, and we've also got you covered with a guide to using XP Mode on Windows 7 machines without hardware virtualisation. If you don't fall into either of those categories, or you are using Windows Vista — or even XP, hit the link for the full walk-through tutorial.
Create an XP Mode for Windows 7 Home Versions & Vista [How-To Geek]