See El Reg It's howto setup the XP VM under any version of windows (or on Linux) and includes a few suggestions on how to keep it safe. Great if you still have some apps that don't run under W7/8/wine.
I suspect most people with "Home" editions of XP or W7 will stumble on that given the key/authentication requirements. As it happens I have done almost exactly as they describe on an "oldish" Dell laptop licenced for XP Pro. I installed (legally) a fresh copy of W7 Home Premium and downloaded XP Pro as described and run it in a Microsoft VM, validated with the OEM key on the case. Technically the Microsoft VM doesn't work (isn't available or included?) on W7HP but that's almost trivial to overcome. I use this to run some software that refuses point blank to run on anything later than XP.