According to this article, http://www.webmonkey.com/blog/Micros...al_Partnership , "Microsoft knows server virtualization tools are a threat and wants to head them off at the pass." Is that because they would allow servers to run Windows from inside Linux, thereby allowing Linux to ultimately control the servers?

No, it's because people can create a single virtual machine containing one valid copy of Windows, then make 1000 copies.

Normally, on installation, Windows validates itself by creating a signature based on the system's hardware, memory, etc. Then Microsoft validates the installation based on the signature and activates that copy of Windows.

The idea is that if a person tries to copy a Windows installation from one machine to another (by cloning drives for example), the signature will change and the process will fail. But if you copy an entire virtual machine, the signature doesn't change (because from within the VM, the Windows code can't tell that its environment has changed). So Microsoft hates virtual machines and has specified that installing Windows on a virtual machine violates the terms of the license.

Remember, even though virtual machines make a lot of sense, Windows isn't supposed to make sense, it's supposed to make money.

Oh...well, I don't support making free copies of proprietary software, so this makes sense to me. Am I breaking the law by running Windows XP in a Virtualbox VM, or does the anti-virtual machine rule apply only to servers?

Microsoft hates anything that can't swell their profits.

I believe the no-VM rule only applies to newer versions, but IANAL and I could certainly be wrong. In fact, if being wrong was an Olympic event, I would have at least one gold medal on my mantelpiece.

If it were true, it's not a criminal offense, it is sort of like breaking the terms of a contract, IOW it's not part of criminal law. Again, IANAL.