After working in Virtual machines you might think whether it is possible to create virtual image file out of any physical server. Yes, it is possible.
Microsoft have released Virtual Server 2005 Migration Toolkit (VSMT) Beta tool for this purpose. This tool can be used to automate the migration of OS from Physical server to Virtual Server. You can download this tool from this location
http://www.microsoft.com/windowsserversystem/virtualserver/evaluation/vsmt.mspx
This tool is still in beta, so if you find any bugs. You can report at this place.
http://www.microsoft.com/windowsserversystem/virtualserver/evaluation/vsmtbeta.mspx#ECAA
Note: This tool can not be used to migrate a physical machine to virtual PC. This is only for virtual server 2005. This tool can not be used to migrate virtual server to physical server also.
To know more about VSMT, read this faq.
http://www.microsoft.com/windowsserversystem/virtualserver/evaluation/vsmtfaq.mspx
If you face any problem when you move from physical to virtual machine. Read Ben Armstrong blog. He is the program manager of Microsoft Virtual Machine Team. He is giving many tips on how to migrate a physical machine to virtual machine.