Snapshots are a new feature of Windows Server 2008 Hyper-V. Snapshots are a point in time version of a virtual machine…..what does that mean you ask? It means that you can be running a virtual machine, take a snapshot and at any point you can select a previous snapshot and revert back to that point in time. You end up with the virtual machine in the EXACT configuration that it was when you took the snapshot…and I mean exact….memory, virtual hardware, processes, state, etc. So you can have a running virtual machine, take a snapshot, change the virtual hardware configuration, format the disk and install a different OS, it does not matter, when you apply the previous snapshot it looks exactly like it did when you took the snapshot.
Snapshots do not affect the running state of the virtual machine, meaning that taking a snapshot does not change the virtual machine hardware, applications, or the currently running processes. It also means that deleting a snapshot does not change the virtual machine either….it just means that you cannot go OOPS and go back to that point in time to get you out of something you just did.
The snapshot files consist of the following:
If you create snapshots one right after each other and never apply a previous snapshot, the you will have a tree with one branch. if you apply a previous snapshot, then you will get another branch to the snapshot tree starting at the applied snapshot.
When you create a new VM in a directory, let’s say D:\TestVM, two sub directories are created – D:\TestVM\Snapshots and D:\TestVM\Virtual Machines. The \Snapshots directory contains nothing, but the \Virtual Machines directory contains the original XML configuration file saved with a unique GUID as the filename with an .xml extension and a directory to house the save state files (.VSV and .bin) memory files. The directory also uses the same GUID as the directory name. I will refer to this as the VMGUID.
Note: All the filenames and directories are actual GUIDs, I am using friendly names to make it easier to write and understand the concept.
The VMGUID.XML file points to the D:\TESTVM\TESTVM.VHD as the current VHD for all writes. Before you do any snapshots, all changes get written to the D:\TESTVM\TESTVM.VHD file and any save state is saved in the D:\TestVM\Virtual Machines\VMGUID directory.
When you create the first snapshot you have two scenarios:  You create it with the virtual machine powered down or  you create it while the virtual machine is running.
CASE  – VM is powered off
CASE  – VM is powered on
Both Case  and  proceed the same from here….
From this point on, all writes are written to the WORKING.AVHD file. If you make a bunch of changes and then decide to use Revert (to go back to the point in time of the first snapshot), this is what happens
So you make a bunch of more changes and then take another snapshot, this is what happens
So for each new snapshot in succession
Hope that provides you with a better understanding on what snapshots are and how they are created under the hood…..I will save deleting snapshots for a future post :-)