A snapshot is a “point in time image” of a virtual guest operating system (VM). That snapshot contains an image of the VMs disk, RAM, and devices at the time the snapshot was taken. With the snapshot, you can return the VM to that point in time, whenever you choose. All changes made after the snapshot was taken may be based on that snapshot information (incremental changes). You can take snapshots of your VMs, no matter what guest OS you have and the snapshot functionality can be used for features like performing image level backups of the VMs without ever shutting them down. Do not confuse Virtual Machine Snapshots with Microsoft’s VSS (Microsoft’s Volume Shadow Copy Service). Snapshots can be taken in just about every virtualization platform available.
For more information on Hyper-V snapshots, see Virtual PC Guy’s Weblog: Managing Snapshots with Hyper-V