Late last week VMware released VMware Fusion 4.1, an update to its virtualization package for Mac OS X that aims to play catch up to Parallels Desktop 7 in some respects and surpass it in another. The free update brings performance increases and better Lion host compatibility, as well as the ability to run non-server versions of Mac OS X 10.5 and 10.6 in virtual machines-something Parallels can't do.

Graphics performance is one area where VMware Fusion has lagged behind Parallels Desktop. MacTech showed this a few weeks ago when it tested VMware Fusion 4.0 against Parallels Desktop 7. VMware Fusion 4.1 improves 2D and 3D graphics, according to two (different) VMware release notes page (here and here). Windows 7 (with the Microsoft hot fix KB 2522761) benefits from faster screen size changes. Graphics under when using Mac OS X 10.7.2 as the host OS is improved. VMware said that users of version 4.1 will see a six-fold increase in performance of HTML5 graphics with Internet Explorer 9 in a virtual machine. VMware Fusion 4.1 also improves the speed of transitions into Unity and full screen modes and improved startup time. Graphics bugs in the Mac Pro and non-English copies of the software have been fixed.

For Windows virtual machines, Fusion 4.1 will automatically resize NTFS partitions on resized virtual hard disks to take over new space. The update also fixes a bug with using the migration assistant to move Windows to Mac OS X 10.7.2, as well as some other bug fixes.

The ability to install and run the client versions of Leopard and Snow Leopard in virtual machines enables Lion users to run older PowerPC Mac OS X applications, an ability that Apple abandoned when it dropped its Rosetta technology from Lion. For some Lion users, running Mac OS X 10.5 or 10.6 in VMware Fusion 4.1 gives them access to software no longer available in an Intel version, such as Quicken Deluxe for Mac. For others, it means not having to spend money replace software that meets their needs, such as older versions of Adobe CS or FileMaker.

Parallels Desktop 7 will only allow you to install the server versions of Leopard Snow Leopard non-server versions. Both Parallels and VMware enable you to run Lion and Lion Server in a virtual machine.

VMware Fusion 4.1's improved Lion host compatibility include a full-screen mode that works like Lion's built-in full-screen mode. Although version 4.0 had a full-screen mode, it now works the same way it does with other Lion applications, by clicking Lion's full-screen button at the top right of a virtual machine window. The full-screen virtual machine moves to a new space, as do other Lion applications when put into full-screen mode.

VMware Fusion 4.1 also includes improvements for running Lion in a virtual machine. File Vault 2 disk encryption (of the virtual hard drive) is now when using Mac OS X 10.7.2 or later. Mouse movements in the Lion guest OS are smoother. Virtual hard drives for Mac OS X guests now appear as internal hard drives and not external hard drives. You can now also re-install OS X 10.7 in a VM from the Lion Recovery HD, a feature that Parallels Desktop 7 has. (In both cases, this requires re-downloading Lion.)

The 4.1 update also restores a version that was available in version 3.x but which was removed in VMware Fusion 4.0 - the ability to automatically start a virtual machine when Fusion is launched. This is now a setting in a virtual machine's Settings menu, under General.