A Generation 1 VM is a Microsoft Hyper-V virtual machine that uses the original Hyper-V BIOS-based architecture.
An example of retroactive nomenclature, the term Generation 1 VM came into use only after Microsoft introduced the Generation 2 VM format in Windows Server 2012 R2; prior to this release there was only one type of Hyper-V VM.Content Continues Below
Administrators using Windows Server 2012 R2 or later operating systems have the option of creating either type of VM. One of the primary differences between the two formats is that a Generation 1 VM was designed to closely emulate a physical machine, whereas a Generation 2 VM is hypervisor aware, and does not rely on synthetic or emulated hardware. For this reason, Generation 2 VMs often offer improved performance, such as faster boot times, than Generation 1 VMs.
However, there are several reasons why administrators may choose to continue using Generation 1 VMs even in Windows Server 2012 R2 virtualization environments. For starters, VM generations cannot be changed once the VM is created. Therefore, if there's a chance a VM may need to be migrated to a server running an older version of Windows Server, then a Generation 1 VM would allow for this flexibility. Generation 1 VMs can access a physical DVD drive, whereas Generation 2 VMs cannot. Generation 2 VMs also only support Windows Server 2012 and later and 64-bit versions of Windows 8 and later as guest operating systems. Generation 1 VMs use the original VHD format, while Generation 2 VMs use the newer VHDX file format.