I found out more about them:
(source: the book Windows 7 Secrets p.102-115)
1) Windows 7 offers both Windows Virtual PC and Windows XP Mode.
2) Windows Virtual PC and Windows XP Mode are two different things.
3) To install Windows XP Mode, Windows Virtual PC will need to be installed too.
4) Windows Virtual PC on Win 7 is a Virtual PC. We can install any guest operating system on it (supposedly)
5) Windows XP Mode is to run a Win XP app side by side with a Win 7 app. There is no guest operating system.
6) So again, Windows Virtual PC and Windows XP Mode are two different things.
7) Windows Virtual PC is provided in all versions of Win 7 (or most version, including Home Premium).
8) Windows XP Mode is only in Win 7 Professional, Enterprise, or Ultimate. It is not in Home Premium version.
9) To run Windows Virtual PC or XP Mode, the CPU needs to support hardware assisted virtualization. The BIOS needs to set to enable it too. If your CPU doesn't support it, you can always go back to the other virtual PC solution. VirtualBox is free, and so is VMWare's Player.