Virtual machines are created and managed through a Web-based interface that relies on Internet Information Services (IIS) or through a Windows client application tool called VMRCplus.

New features in R2 SP1 include Linux guest operating system support, Virtual Disk Precompactor, SMP (but not for the guest OS), x64 host operating system support, the ability to mount virtual hard drives on the host machine and additional operating systems support, including Windows Vista.

Virtual Machine Additions for Linux are available as a free download.

The initial release of Microsoft's Virtual Server, general availability, was announced on September 13, 2004.

On 2006-04-03, Microsoft made Virtual Server 2005 R2 Enterprise Edition a free download,[5] in order to better compete with the free virtualization offerings from VMware and Xen, and discontinued the Standard Edition.