I liked the option that windows Vista is offering via (Complete PC Backup) available in the vista control panel >>Backup.
This will let you convert your machine to VHD file .Well, this VHD is not bootable (i.e. you cannot boot it using Microsoft Virtual PC 2007) but you can add it as secondary disk and view it its content from there. Or you can use it via recovery console by booting your vista using Recovery console and use Complete PC Restore.
What will be great if we can use this VHD on another machine by booting it up in recovery mode and use Complete PC restore and pointing to this VHD file. Thus migrating complete Vista Machine from hardware to another !!.
If someone can view this VHD offline and then add the required boot files ,then it may become bootable VHD that you can carry it on your own USB .( you will then have your Vista machine roaming on your own USB !! ) Adding to this that if the USB is lost , important files should be encrypted using smart card EFS certificate or any other encryption tool.
From there ,you can imagine how virtualization can be used !!