To follow up on Kevin Kuphal's answer (sorry wouldn't fit in the comment section):
Yes vhdmount.exe does work and remember you don't need to install Virtual Server. You can install only the VHDMount components (as the link Kevin provided stated), use the Custom option in the Virtual Server R2 SP1 installer and clear all components except VHDMount. If you want to use the command line options over the registry modifications use the following.
To mount an image:
vhdmount.exe /m vhd_path drive
where vhd_path is the path to the .vhd file you want to mount and drive is the drive letter to which you want to assign the image. You need to specify the colon after the drive letter (e.g., F:).
By default, VHD Mount creates an undo disk for each mounted image, just like Microsoft Virtual PC and Virtual Server do. If you want to override this behavior and write directly to the mounted image, you can add the /f switch:
vhdmount.exe /m vhd_path drive /f
To dismount an image, you have two options. If you want to save any changes you’ve made to the VHD before dismounting, follow the syntax:
vhdmount.exe /u /c vhd_path
If you don’t want to save any changes you’ve made to the VHD before dismounting, use this syntax instead:
vhdmount.exe /u /d vhd_path
Note that you need administrative rights to run VHD Mount. In Windows 7 and Server 2008 R2 you can create and attach vhd's directly through the Disk Management tool or through diskpart.
Best Answer
Microsoft uses a technology called Volume Shadow Copy to make these backups. It's a very clever approach because it allows full volume sector-by-sector backups (like a Ghost image) that can be stored incrementally. If you backup every day, each additional copy only consumes the space required to store the changes, yet still looks like a full stand-alone image.
The combination of VHD (a convenient pre-existing disk image format) and Volume Shadow Copy makes it trivial to restore to any point in time (that you have a backup of).
Why are these image (or sector-based) backups useful?
1) Sector-based backups are orders of magnitude faster than file-based ones. In a sector-based backup the disk heads are moving sequentially whereas in a file-based backup the heads are moving randomly. In many cases this means the difference between backups being able to complete overnight or not.
2) You can do a complete system restore simply by booting from the Vista/Windows 7 DVD and going through the option of recovering your system. This covers scenarios like failed hardware or malware damaging your OS.
3) They are very space-efficient. Think of a 100 MB database file. If you do incremental file-based backups, every new backup will consume 100 MB. On the other hand, a sector-based incremental backup will only consume the space necessary to store the changes to the 100 MB file, which could be as small as a single sector.
Microsoft's use of the VHD format was a logical choice that saved them creating a new format -- a laudable approach in my opinion (the less "standards" the better). Think about it; with VHDMount I can now mount full-disk backups AND Virtual PC/Hyper-V virtual disks -- what's not to like? Nowhere in all that is the implication that an image of a computer will boot on completely different hardware (which is what Virtual PC/Hyper-V are equivalent to).