Is it possible to convert physical environments to virtual machines

Solution 1:

VMware vCenter Converter

This is the system I use when I go from physical to virtual systems.

Automate and simplify physical to virtual machine conversions as well as conversions between virtual machine formats with VMware vCenter Converter. Use the intuitive wizard-driven interface of VMware vCenter Converter to transform your physical machines to virtual machines.

• Convert Microsoft Windows and Linux-based physical machines and third-party image formats to VMware virtual machines.
• Complete multiple conversions simultaneously with a centralized management console.
• Minimize the number of steps to conversion with easy-to-use wizards.

Solution 2:

disk2vhd from System Internals may be what you are looking for.

Disk2vhd is a utility that creates VHD (Virtual Hard Disk - Microsoft's Virtual Machine disk format) versions of physical disks for use in Microsoft Virtual PC or Microsoft Hyper-V virtual machines (VMs).