Microsoft Virtual PC and Microsoft Virtual server do not have a functionality to increase a storage capacity of a Virtual Hard Disk (VHD). At the same time it is quite easy to underestimated storage requirements of a virtual machine. This problem may be especially annoying for fixed VHDs, used due to improvement in performance they offer, since it is not desirable to allocate too much storage space for them from the beginning. The standard solution for this problem used to be using Ghost inside of the guest OS to create an image, and restoring the image to a bigger, newly created VHD, attached to the same virtual machine. This procedure sure works, but it is painfully slow and laborious manual process.
VHD Utility offers a better solution. It can expand VHD in one operation and has a convenient and intuitive GUI (context menu on a VHD file). Just right click a VHD file in Windows Explorer and follow a simple wizard. The extension operation is going to be almost simultaneous if you choose to expand a VHD in place (make sure you have a current backup), or it will take some time, needed to copy the data, if you choose to leave the original VHD intact and expand a copy of the original VHD. After a VHD is expanded using VHD utility one additional step will be required inside of the guest OS to extend a file system partition.