Jose pinged a great email across a discussion list a few days back, with this diagram in, which really helps to sum up Hyper-V's storage options with the most common scenarios:

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As you can see, there are a couple of more common scenarios.  The first two disks, (Disk 1 & Disk 2 in the Parent Partition, Direct Attached Storage, DAS)) can be exposed to the VMs in 1 of 2 ways.  The first, is by, on the Parent Partition, assigning the physical disk 1 a drive letter (using DiskPart or diskmgmt) and then storing the VHD file for that particular VM on that physical disk 1.  This is probably the most common scenario when demo-ing, or testing.  The VM is effectively a single file existing on the physical disk of the Parent Partition, in this case, V1.vhd.  The VM itself, has it's corresponding .vhd file presented as C:\ in this example, to the guest OS.

The second physical disk (Disk 2) in the Parent Partition, in the example, is being used as a Pass-through Disk.  In this case, on the Parent Partition, the Disk 2 isn't assigned a drive letter, and instead, the configuration of the VM is such that the VM get's pass through access, and manages the formatting, partitioning etc.  If you were to explore the folder structure of Disk 2 from within the Parent Partition, you'd be viewing the actual folder structure and files etc, of the VM, not the Parent.

OK, so that's the DAS dealt with.  What about the drives on the SAN?  Well, if we take LUN1 (Logical Unit Number) and LUN2, and these could be attached by Fiber, or by using iSCSI, in the first case (LUN1), we have assigned a drive letter, in this case Y:\, on the Parent Partition, and in the same way as we described earlier, we're simply placing a .vhd file on there, in this case, V2.vhd, and this is, in effect, he hard disk of the VM.  The VM itself, sees this .vhd file as E:\ within the guest OS.  At this stage, both V1.vhd and V2.vhd are very portable, as, to the Parent Partition, they are just 2 separate files that we could copy and paste somewhere else, like onto a DVD or USB drive.  Admittedly, they may be quite big files', but still portable in effect, as there is no direct reliance on the physical disk that it's being currently stored on.

LUN2 is being used, again, as a Pass-through Disk from Parent to Child, with the unformatted LUN on the Parent being presented straight through to the VM itself, in the same way as I talked about earlier.  The VM sees this unformatted LUN as unformatted disk space, so you manage the partitioning and formatting, again, from within the guest operating system.  As I mentioned earlier, the mechanisms I have described for LUN1 and LUN2 are applicable for both iSCSI and Fiber Channel attached storage.  In the case of FC, the HBA attached to the Parent Partition will need to support access, thus the VM's on top can access the storage.

The final example is LUN3, where in this case, the LUN3, which is unformatted, is being presented straight from the SAN to the VM, bypassing the Parent.  This is not possible with Fiber Channel, but is possible with iSCSI, and with iSCSI technologies improving dramatically, the differences in performance in some cases, are non-existent, so iSCSI, not only is cheaper, but is, in some cases, as performant as FC.  In the example, the VM would see, again, unformatted disk space, which the guest OS would need to fomat, partition and manage as appropriate.

You can read even more about the storage options around Hyper-V on Jose's blog posts: