VHD (Virtual Hard Disk) is a file format which represents a virtual hard disk drive (HDD). It may contain what is found on a physical HDD, such as disk partitions and a file system. It is typically used as the hard disk of a virtual machine. VHDs are commonly used by webdevelopers to locally run specific versions of Internet Explorer, but can also be part of entire virtualization solution in Microsoft Virtual Server.
As taken from wikipedia
VHD (Virtual Hard Disk) is a file format which represents a virtual hard disk drive (HDD). It may contain what is found on a physical HDD, such as disk partitions and a file system. It is typically used as the hard disk of a virtual machine. VHDs are commonly used by webdevelopers to locally run specific versions of Internet Explorer, but can also be part of entire virtualization solution in Microsoft Virtual Server.
Since June 2005, Microsoft has made the VHD Image Format Specification available to third parties under the Microsoft Open Specification Promise.
VHDs can be created in, added to and removed from a virtual machine (VM) quickly and easily. VHDs also support various configurations that can allow you to use physical disk space efficiently. The most common virtualization programs that run VHDs are Microsoft Virtual PC and Microsoft Virtual Server.