So, of those two, how do you decide which one is right for you? In the past, I tried to answer that question by comparing virtualization programs head-to-head, to see how they did on specific tasks. This time, however, that task-based approach didn't work, largely because (with a couple exceptions that are noted below) the latest versions of Fusion and Parallels Desktop are nearly indistinguishable in performance. So instead of picking one program over the other based on how well it performs a given task, the choice now hinges on some more subjective factors. So this time around, I'll look at those and try to explain how the two programs differ on each.
Note that, for the most part, I've focused primarily on using these programs to run Windows on your Mac. You can, of course, use them to run other operating systems—including OS X Lion itself—but that's not the focus here.
As noted, both Parallels Desktop and Fusion perform well when it comes to running Windows 7 on a Mac. Macworld Labs ran both programs through PCWorld's WorldBench 6 benchmark suite, and the results were close: overall, VMware Fusion beat out Parallels Desktop by a very slight margin (113 to 118, meaning Fusion was 18% faster than a theoretical baseline system, Parallels Desktop 13%). Parallels Desktop was faster than Fusion in some individual tests, Fusion was faster in others, and in the rest the differences were almost too close to call.
Distill these numbers to their essence, and what you have are two fast, capable ways of running Windows on your Mac.
Advantage: Neither (or both).
Specific types of performance
While the two programs are practically indistinguishable in general usage, there are three specific scenarios in which greater differences emerge.
The first of them: gaming. If you want to run Windows in a virtual machine to play games that you can't play on a Mac, then you'll want to use Parallels Desktop 7. In my testing, it handily outperformed Fusion, especially on newer titles. One reason is that Parallels supports up to 1GB of video ram (VRAM), versus only 256MB in Fusion. Parallels Desktop also has better DirectX support; one game I tried looked fine in Parallels using DirectX, but awful in Fusion; switching to OpenGL in Fusion solved that problem, but not all games offer this option.
Overall, Parallels Desktop's 3D engine seems to work much better for games in Windows than does Fusion's engine. So if Windows gaming is your thing, Parallels is the one you want to use.
Advantage: Parallels Desktop.
Linux with Accelerated Graphics