VMs most definitely are "real" computers. Real is as real does :)

I'd be interested in hearing the outcome of trying to run your Win7 VM on your Win7 bare-metal host. I've searched the web for about half an hour and can't find anything saying you can use a standard OEM or retail license for anything other than one bare metal installation OR one VM (i.e. not both). As I mentioned below, SA seems to address your use case, if you purchase SA you can run up to 4 concurrent Win7 VMs.

Or, you can buy 1 more retail Win7 license and use that for VMs (but you couldn't legally run more than 1 of those concurrently).

Or, uninstall your bare-metal Win7 installation, install a bare-metal hypervisor such as VMWare, and set up a Win7 VM on that.

>The host is Vista. The VM is Microsoft Virtual Machine. I installed Windows 7 there and it can see the HD, the DVD, the NIC, the network. Granted, it can see the other HD that has Windows 7 as its OS but since I'm currently booted off the HD that has Vista as the OS it has no knowledge of the Windows 7 real install ( the one that has the key registered)
>
>But to make this simple. If I have a Vista box, I run Virtual Machine and install that same Vista as the OS of the VM, should that require an additional license/registration/activation whatever ? I didn't think VM's were "real" computers, just playgrounds for testing.
>
>I'm going to try running my Windows 7 VM on the Windows 7 HD and see if it still feels like it is in a foreign land.
>
>>>I own Windows 7 Ultimate and have installed and activated it. Now I want to run a VM with Window 7. I installed the same on on the VM and now it is trying to activate and tells me i have 21 days left.
>>>
>>>I thought VM OS was covered under the EULA for the original OS? ? Does MS expect me to spend $300 for an OS for every VM I crank up, run for a while and then blow away? I am on the same box with the same NIC just testing MS Beta software. I have a backup of the VHD /VMS of course from right after I got it all set up. Do I have to blow away every 29 days and restore or what? Can't they tell I"m running in VM when i go to activate???
>>
>>You may need to upgrade to Software Assurance to get virtual OS rights:
>>
>>http://windowsteamblog.com/blogs/springboard/archive/2009/08/06/windows-7-enterprise-edition-understanding-software-assurance-volume-licensing.aspx
>>
>>If that's not what you're talking about, can you elaborate on what you're trying to do:
>>
>>- What is the host? A bare-metal hypervisor, or is Win7 the host?
>>
>>- If an OS like Win7 is the host, what additional software (or built-in part of Win7) are you using to manage guest VMs?
>>
>>Depending on the hypervisor/host OS and virtualization model, the guest OS may not see or have any direct access to the underlying hardware, only virtualized hardware, which is not the same as the real thing via direct access. So as far as Windows Activation is concerned, you've installed that instance on "different" hardware.