Microsoft Hyper-V is a 'Type 1' hypervisor which can be installed directly on the hardware to host and run virtual machines. Hyper-V differs from other hypervisors such as VMware ESX and Citrix XenServer in that it uses an underlying Windows based operating system instead of a Linux derivative, as used by it's main competitors.
Hyper-V also uses a series of partitions to install guest operating systems, providing a logical separation, with the primary (parent) partition requiring the installation of the Windows 2008 Server operating system, which then acts as an intermediary for other partitions by providing them indirect access to the underlying hardware.
The version of Windows installed in the primary partition isn't a full version, instead a core version without a GUI is installed, resulting in a lower footprint.
These additional partitions, commonly referred to as child partitions, are where the guest operating systems are installed to. They then communicate with the primary partition when requests are made for access to the underlying hardware through various drivers. This set up allows better communication with the supporting hardware and provides easier management of the whole environment.
Hyper-V R2's new features is support for 64 logical processors, Live Migration support and VM Chimney to name a few. Hyper-V R2 is available as a standalone hypervisor or as a part of the Windows Server 2008 distribution, where it is distributed as an add-on.
Hyper-V R2 includes a live migration feature called 'Live Migrate' which enables virtual machines to be moved from one physical host to another. This makes the maintenance of virtual machines easier, as there is no need to power them down or stop them from carrying out their assigned duties.
Another feature called 'High Availability' allows the virtual machines to automatically restart should the machine crash, with the ability to also define whether the restart takes place where the virtual machine currently resides or on another physical machine.
To manage these new features, as well as providing enterprise management capability, System Center Virtual Machine Manager 2008 R2 is required. This product unlike Hyper-V is not free and requires licensing per managed physical server.