A "proper" Vm directory (meaning a VM directory that Parallels VM creation methods creates) has one file per hard disk (an hdd file) and one VM description file (a pvs file). It may also contain other files if you choose to put floppy or CD images there.
The file naming convention is for the directory to be named for the OS (say myos) and the files to be named myos.hdd, myos.pvs, etc. The default location for the VM directories is ~/library/parallels/ (where ~ stands for your user main directory. There is a lock file (ending in .lock, but unfortunately for now invisible in Finder) present when the VM is running (or has crashed). These lock files have been a source of much confusion and I really hope Parallels makes them visible in a future release.
Other configurations will work as long as you point Parallels to the pvs file (an easy way to do this is to double click the file in finder) and the pvs file has correct pointers to any other files you are using such as hdd files. These pointers can be edited in the VM console once the VM is selected.
Last edited: Dec 21, 2006