Microsoft's Hyper-V has come a long way since it was introduced in Server 2008. Hyper-V 2012 is a mature and full featured hypervisor. Setting up virtual machines in Hyper-V is a breeze, here's how.
If you haven't already installed Hyper-V, see How to Setup Hyper-V on Server 2012.
Create a New Virtual Machine
Go to the Start screen.
Click Administrative Tools.
Double click Hyper-V Manager to launch the Hyper-V Manager management console.
Right click on the host server in the left pane of the Hyper-V Manager management console.
Select New and Virtual Machine... to launch the New Virtual Machine Wizard.
Read and click Next.
Enter a name for the new virtual machine.
Click the checkbox to change the path to where the virtual machine will be stored. By default, the virtual machine will be stored in the default location selected when setting up Hyper-V.
Click Next when everything is as needed.
Select the generation for the new virtual machine and click Next.
Enter the amount of memory required to start the operating system of the virtual machine in the Startup memory box. I recommend a minimum of 1024 MB for modern operating systems. These setting can be tuned later through the Hyper-V Manager.
Check the Use Dynamic Memory for this virtual machine check box if you want to use Dynamic Memory. Dynamic Memory is good, but for more information see Microsoft's Hyper-V Dynamic Memory Overview.
Select a network adapter for the virtual machine to use in the Connection drop down box and click Next.
Select Create a virtual hard disk, Use an existing virtual hard disk, or Attach a virtual hard disk later.
If choosing to create a virtual hard disk, enter the file name in the Name box. Enter or browse to the path where the file will be stored in the Location box. By default the path will be to the location selected when Hyper-V was installed.
If you choose to use an existing file, enter the path in the Location box under Use an existing virtual hard disk or browse to the location of the file.
There are a number of options for installing the operating system on the virtual machine. Point the wizard to the location of the installation media or files.
In the example above, a Windows Server 2012 R2 ISO is being used.
Confirm the settings for the new virtual machine are correct and click Finish.
Back in the Hyper-V Manager management console we see the new virtual machine.
Right click on the new virtual machine and select Start to boot the new virtual machine.
Right click on the new virtual machine and click Connect to open a connection to the new VM, install the operating system, and configure it as needed.