REF: The Single Most Important Virtual Machine Performance Tip

If you use virtual machines at all, you should have the single most important virtual machine performance tip committed to heart by now: always run your virtual machines from a separate physical hard drive:

[the] biggest performance win is to put the virtual hard disks on separate disk spindles from the operating system. The biggest performance hit in virtual machines is disk I/O. Making the VM fight with your OS and swap disk makes this issue much, much worse. Additionally, today's USB 2.0 and firewire external hard drives run on a fast interface bus, have large buffers and spin at 7,200 rpm, as opposed to 4,200 rpm for most laptop hard drives.

<update>

That's one reason why all the desktop machines I build now have two hard drives:

1. A faster, smaller drive for the operating system and essential applications. You can't beat the 10,000 rpm Western Digital Raptor series for this role.
2. A larger data drive for virtual machines and everything else.

</update>

in: Coding Horror.