Just to reiterate, Windows 7 is a totally new operating system. It's supposed to be a bigger leap forward than XP was to Vista, and is built off the MinWin kernel, an operating system base code that is optimized for speed and effieicency.
It is not considered a service pack, or small revision of Vista.
As for this "virtualization" idea, that's wrong. It is still a regular code base, and is not emulated at all. It does however, support hypervisors, but that's another big explanation I won't go into. I've seen a M3 version of 7 in action, and I can tell you with total certainty, that it is NOT a virtualized operating system.