A Differencing Disk is a disk that holds changes made to the base, or parent disk, without affecting the parent disk. You can use one parent disk for multiple servers that have differencing disks. Virtual Server 2005 allows you to merge the differences into the parent disk, or merge the parent and differencing VHD into a new VHD.
By merging the parent VHD and difference VHD into a new VHD and using the merged disk we can increase performance. Merging the two is simple enough and is done on the Virtual Server administration website. Under the Virtual Disk Header, select Inspect.
Next to Known virtual hard disks, select the Differencing VHD and verify the full path to the VHD file. Click Inspect.
Under Actions, click Merge virtual hard disk.
Select Merge to New Virtual Hard Disk, enter the path and the filename where the merged VHD file should be placed. Next select the type of VHD to create. You can choose Dynamically xxpanding virtual hard disk, or Fixed size virtual hard disk.
Click the Merge button and the new disk will be created.