Virtual PC 2007 does not have the tight integration between host/guest systems that XP
mode has. Virtual PC for Windows 7 does have the same features as the pre-configured XP mode.
With XP mode applications installed in XP are directly visible on the start menu in Windows 7 and can be launched from there. Also when you launch the app it will appear as you run it in Win 7 and not in a virtual machine.
The big convenience with XP mode is that you get the XP license for free and everything is already configured so no extra work needed on your part.
The second feature have been available in vmware/virtualbox at least on other platforms.