Native VHD is a feature of Windows 7 and Windows Server 2008 R2 where you can configure a machine to boot up from a VHD (virtual hard disk) file instead of a physical file system. Many people choose to do this for test or demo environments. It could be handy to know about this feature if you want to quickly use one of Microsoft’s demo VHD’s and you don’t have dedicated hardware to run it on …. just download the VHD, configure Native VHD, and away you go. But honestly, I’d probably just use my laptop which I would boot up with Hyper-V on my eSATA drive.
Microsoft has released a document on the subject: “Describes the functionality and usability of native VHD boot, which is a feature in Windows 7 and Windows Server 2008 R2”.