It’s OK to share a partition in Windows 7

Thanks to the radically revised setup architecture introduced in Windows Vista and also used in Windows 7, you can safely discard one of the basic tenets that have governed installation decisions since the beginning of the Windows era. You want to point Windows 7 setup to a partition on which another version of Windows is already installed? As long as you have sufficient free disk space and you don’t plan to use the copy of Windows on that volume any more, go right ahead. When you choose to do a clean installation in this nondestructive configuration, Windows 7 setup moves the old Windows, Program Files, and user profile folders (Documents And Settings for Windows XP, Users for Windows Vista or Windows 7) to a folder named Windows.old.

Why would you want to do this? Let’s say you currently have a system that has a single disk with a single partition and plenty of free disk space. You want to start fresh with a clean installation, but you have lots of valuable data and you don’t want to lose any of it. Performing a nondestructive clean installation gives you the fresh start you’re looking for, with your data files safely ensconced in the Windows.old folder.You can no longer start up your old Windows installation, but you can copy any of the saved files from that folder to your new user profile whenever you’re ready. (In addition, all the device drivers from your previous installation are available for your use; you’ll find them in Windows.old\Windows\System32\DriverStore\FileRepository.)

Why is this option acceptable now? In Windows XP and earlier versions, the operation of the setup program invariably involved some commingling of files in the old and new Windows installations. Those unwanted system files and leftovers from previously installed programs defeated the purpose of doing a clean installation. But the image-based Windows setup used by Windows Vista and Windows 7 quarantines your old files and allows you to do a truly clean installation of your new operating system.

Source of Information : Microsoft Press - Windows 7 Inside Out