In .Net Framework v.4.0, you can use in-process side-by-side hosting to run multiple versions of the common language runtime (CLR) in a single process

1. End user and system administrator can now install a new version of the runtime and it will have no imact on their computers

Scenario (taken from MSDN): Native application that uses COM components built with earlier versions of the .NET Framework.

.NET Framework versions installed: The .NET Framework 4 and all other versions of the .NET Framework used by the COM components.

What to do: In this scenario, do nothing. The COM components will run with the version of the .NET Framework they were registered with.

2. Application developers can direct the application to run under a newer or earlier version of the .Net Framework as shown below

Scenario (taken from MSDN): Managed application built with the .NET Framework 2.0 SP1 that you would prefer to run with the .NET Framework version 2.0, but are willing to run on the .NET Framework 4 if version 2.0 is not present.
<configuration>
  <startup >
    <supportedRuntime version=”v2.0.50727″ />
    <supportedRuntime version=”v4.0″ />
  </startup>
</configuration>

3.Now you can have an application that was built using an earlier runtime and a library that was built using the .NET Framework v.4.0 but you must force your application to also use the .NET Framework v.4.0 as shown below

<configuration>
  <startup useLegacyV2RuntimeActivationPolicy=”true”>
    <supportedRuntime version=”v4.0″ />
  </startup>
</configuration>