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Creating Virtual Machine

This is the first time you start Parallels Workstation (right?), here is what you see on the screen:

New VM Wizard - Workstation First Start

As long as there is no virtual machine to open, a tool for building them is automatically opened. It's called New Virtual Machine Wizard. Click the Next button.

New VM Wizard Operating System

On the next screen notice that the first option, Create a typical VM, is selected. (Keep in mind that "VM" means "virtual machine".) We highly recommend that you leave this selection untouched, especially if you are new to virtualization; it's the easiest way to create a new virtual machine. Click Next.

New VM Wizard - Select Guest OS

On the next screen, you specify what guest operating system you are going to install on your virtual machine. In fact, you will see that the right operating system is already selected by default: Windows family from the first pop-up menu and the version in the second one (Windows XP). After this click Next.

New VM Wizard - Select Configuration File

In this final step, you're asked to name your virtual machine. The name doesn't really matter unless you plan to create several VMs running the same operating system; in that case, you'll want to give them distinct names ("Windows XP for Games" and "Windows XP for Work", for example). Unless you indicate otherwise, the wizard will name the VM after the guest OS you've specified.

This dialog box also lets you specify where you want to store the files that make up your virtual machine. By default, Parallels Workstation puts the virtual machine into your personal folder. Click Finish to create the virtual machine.

New VM Wizard - Warning

Click Yes to let Parallels Workstation create a folder for the virtual machine automatically.