The software maker will announce this change of heart at its Virtualization Deployment Summit in Bellevue, Wash., on Jan.22.

Virtualization lets a single machine run multiple operating systems, creating greater flexibility and efficiency for customers.

The revised Vista end-user licensing agreement now states that “instead of using the software directly on the licensed device, you may install and use the software within only one virtual (or otherwise emulated) hardware system on the licensed device.”

“When used in a virtualized environment, content protected by digital rights management technology, BitLocker or any full volume disk drive encryption technology may not be as secure as protected content not in a virtualized environment. You should comply with all domestic and international laws that apply to such protected content,” it says.

This is a reversal from June 2007, when the company announced it was standing firm on its more restrictive virtualization policy.

Microsoft is buying desktop virtualization company Calista. Read more here.

Shanen Boettcher, Microsoft’s general manager for Windows product management, told eWEEK that the about-turn is a response to ongoing feedback from customers.

Larry Orecklin, Microsoft’s general manager for server infrastructure, added that customers have shown increased interest and usage of virtualization over the past six months, and that Microsoft can provide guidance to ensure customers have a secure infrastructure. “We think the market is now ready for this,” he said.

Microsoft will also now offer support for Office as a virtualized application and let customers run multiple versions of Office side-by-side on the same device by offering support for Office 2003 and Office 2007 when running in Microsoft Application Virtualization 4.5 and SoftGrid Application Virtualization 4.2.

Up until now this was supported by the SoftGrid team, but not the Office team itself. “The support customers will now receive will be the same whether Office is physically or virtually installed, and we expect the industry to follow us on this front,” said Orecklin.