The Windows Phone 8 emulator requires hardware Hyper-V support. In particular, it requires second-level address translation, hardware assisted virtualization, and hardware DEP support enabled and to not be ran in a hypervisor(no nesting). If you bought your machine within the past 4 years you should have no problem with these requirements. You can check out this article to see more information about that and how to find if your PC supports it.
Because of these hardware requirements, this means you can’t run the phone emulator inside of most virtualization technologies… With one exception: I’ve been using VMWare 9 which appears to include an “unsupported” feature to allow Hyper-V to work though.. So your only choice for running the phone emulator is to either buy VMWare 9 (or 8 with more configuration) or upgrade a physical machine to Windows 8
The unsupported way VMWare allows you to run Hyper-V inside of a VM is that there is a manual option (hypervisor.cpuid.v0 = “FALSE”) which basically tells VMWare not to report to the virtual machine that it’s running in a VM. Hyper-V checks if it’s running in a VM and won’t work if it is, so this gets Hyper-V to work past that check. I personally have tested this whole nested-VM thing with the Phone emulator(including before public release), and other than being quite slow, it does work pretty well with no immediate crashes or anything.
There is a workaround for VMWare Workstation 8 as well in an answer below. However, 9 is much easier to configure, so if you have it use this method.