I tried to install Windows 95 on a Windows Virtual PC virtual machine, but when I am trying to run it post installation, I got an error during boot:
When initializing device IOS:
Windows protection error. You need to restart your computer.
When I was installing Windows 95, during the hardware check, I got an error message about a stack overflow error. I then tried again using Safe Recovery to skip past the errant hardware. I tried using the guide found here (http://helpdesk.princeton.edu/kb/display.plx?ID=4736) to fix the problem, but I was unable to boot into Safe Mode. It is also worth mentioning that my copy of Windows is Windows 95 C (OSR 2.5) and I also managed to install Windows 98 on Windows Virtual PC without any problems.
Best Answer
You've probably allocated hardware that's beyond what Windows 95 knows what to do with.
Also, Windows 95 has problems with processors faster than 2.1GHz: Windows protection error in NDIS with a CPU that is faster than 2.1 GHz.
Check out this msfn.org forum post for more info and possibly helpful patches: Windows 95 2.1GHz CPU Limit BROKEN!
The real answer is, VPC isn't really compatible with Windows 95, because Windows 95 is too old for the virtual hardware in the VM. :)