Once the registry setting is done, a backup of the host server will then include the VM configuration settings, the virtual hard drives in the VMs, and the VM snapshots. Note that this type of backup will not include virtual networks.
The Hyper-V VSS Writer can access virtual hard disks, but it is not able to backup pass-through disks; so it cannot backup any physical disks which are directly attached to a VM. Also, it cannot backup iSCSI storage when the initiator is running inside a virtual VM.
Internal Virtual Machine Backup
Running backup utilities like Windows Server Backup inside VMs has the disadvantage that, in the event of a major server crash, you will need to rebuild the Hyper-V host server and then recreate all the VM settings before recovering the individual VMs. However, in contrast to a host server backup, an internal VM backup can address any physical disks and iSCSI storage running in a VM. In addition, the Hyper-V hot storage addition and removal functions in Windows Server 2008 R2 makes it possible for admins to create a dedicated backup VM that is responsible for protecting virtual hard drives in other VMs.