VSTS Rosario Team Lab
While running through the PDC 08 sessions I spotted this session
Microsoft Visual Studio Team System: Leveraging Virtualization to Improve Code Quality with Team Lab
Would you like to test fixes in a production-like environment before checking them in to source control? The Visual Studio Team System (code name "Rosario") release of Team Lab improves productivity and quality while reducing the cost of building and testing world class products. Learn how Team Lab provides a fast and easy way to create a test environment and tear it down, target specific test environments, and take snapshots of an environment for easy deployment.
Microsoft have in the past talked about the internal build system for the various OS builds that uses virtualization for creating instances of the OS from nightly builds, preloaded with apps and a test brace. I never seen TeamLab so this is a guess but TeamLab sounds a lot like this, using virtualization for creating a base system that TeamLab can copy and apply code from your workspace directly to. I would love to see this being used on the server end for nightly build server system testing.