When you create a fixed size hard disk the space you specify is automatically allocated and reserved for that virtual machine. A dynamically expanding disk however, starts small and grows as needed until it reaches the maximum size you have allowed for it. In most cases, a dynamically expanding disk just seems like the best logical choice in order to not waste useless disk space.
There are some cases however, when a dynamically expanding disk may not be the best choice. With the size of your VHD (virtual hard disk) file constantly changing it can cause the host operating system to become increasingly fragmented. This level of fragmentation can severely degrade the performance of both the host and guest operating systems. This being said, you should carefully analyze your system resources before deciding between a fixed size or dynamically expanding hard disk.
Chris Sanders is the network administrator for one of the largest public school systems in the state of Kentucky. Chris's specialties include general network administration, windows server 2003, wireless networking, and security. You can view Chris' personal website at www.chrissanders.org.