VHD (Virtual Hard Drive) is a type of image file used to mimic hard drive partitions by Microsoft's Virtual PC (found in Windows 7), as well as the older standalone Virtual PC 2007 and Server 2008's Hyper-V virtual machine hosts. Free program Disk2vhd does exactly what it sounds like it will do: turn a partition into a virtual hard drive that you can load and even boot from using the aforementioned virtual machine software.
Disk2vhd couldn't be more straightforward to use. A single dialog allows you to choose which partitions you want to create VHD images from and where you want to put them. You can actually create them on a drive you're copying as the program makes use of the Windows volume snapshot service, though you'll get better performance writing it to another partition. Once created, you simply create the virtual machine then add the VHD or VHDs as IDE hard drives; a simple process.
There's really not much else to say about the Disk2vhd. It does what it does quickly and well. It's free and extremely lightweight. With Windows 7 here, put it in your toolbox.