Web development on the Microsoft platform has always had its hurdles. With Windows XP, your development environment would use IIS 5 where as the server that would host the production site would be IIS 6. Additionally, there was the issue where we were limited to a single website running on that machine (this was a pain when working on multiple projects at the same time).
Microsoft’s virtual web server that would get kicked off by Visual Studi0 (Casini) alleviated some of the hardships by allowing each one of your web projects to run on an individual site. With the release of IIS 7, and particularly the rewrite rules that they provided, we ran into another issue where our production environments supported rest-full, SEO friendly URLs but the virtual web servers initiated by Visual Studio would not be able to process the URLs.
Recently, Microsoft addressed many of these issue with IIS Express. Scott Guthrie blogs about this new tool here: http://weblogs.asp.net/scottgu/archive/2010/06/28/introducing-iis-express.aspx