Many commercial and custom developed applications running on Windows XP and Vista should just work on Windows 7. However, it is highly recommended that customers test the applications before moving them to Windows 7. Microsoft provides many resources on application compatibility testing including Windows 7 and Windows Server 2008 R2 Application Quality Cookbook and the Microsoft Application Compatibility Toolkit (free download). You can watch a series of videos on how ACT works and how to use it at the TechNet site.
For a small set of Windows XP applications that are not compatible with Windows 7, customers can continue to run these applications using the XP mode of Windows 7. Customers can either install the Windows XP mode manually or get it from new PCs that have it pre-installed. The Windows XP mode for Windows 7 (release candidate) is available for download. Note that Windows Virtual PC requires a CPU with the Intel Virtualization Technology or AMD-V feature turned on. For details on how to enable, visit the Configure BIOS page or check with your computer manufacturer.