To address this confusion the Redmond-based software giant has provided a detailed presentation of what sets these two software applications apart. Windows XP Mode is an integral part of Windows 7 Professional, Windows 7 Enterprise and Windows 7 Ultimate and is meant for the small business user.

The software creates a virtual Windows XP environment by leveraging Windows Virtual PC and a preconfigured Windows XP; you can run old(er) apps in the virtual XP environment. Support for multi-threading and USB devices is provided by Windows XP Mode as well. Microsoft explained that in order to get the best user experience you should try out XP Mode on a new PC. But if you don’t want to get a new PC from an OEM (Original Equipment Manufacturer) then the company will make the software available as a separate download.

MED-V is meant to be used by IT pros that deploy Virtual PC at an enterprise level – a big organization, not a small business. It is part of MDOP (Microsoft Desktop Optimization Pack) and comes with features like centralized management, policy-based provisioning and virtual image delivery to help the organization cut down on Virtual PC deployment. There are two versions of MED-V. Version 1, based on Microsoft Virtual PC 2007, is meant to help organizations as they upgrade to Vista. Version 2, comes with support for Windows 7 and Windows Virtual PC, but the software is not out just yet. It will be released within 90 days after Windows 7 becomes generally available (that’s on October 22).

Source: http://www.findmysoft.com/news/The-Difference-between-Windows-XP-Mode-and-MED-V/