List of Mounting / Virtual (CD/DVD) drive software supporting Windows 7
Daemon Tools (Free / Paid)
Daemon tools is one of the oldest and widely used software in this category. There are 2 versions of this product available, as both free and paid-ware. Supports Windows XP / Vista / 7 (x64/x86).

Since the time they have started to sell a paid copy of the product, the free version has started to pack some bloatware like browser tool bars and certain add-ons. However you would be presented with options under custom installation to install the software without these add-ons. Where as the paid versions allows you to create 32 virtual drives supporting Blue-Ray also.
The free version wights around 9MB in size and the Advance version costs around 40 Euro.
Alcohol 120% and Alcohol 52% (Paid)
It was meant as a burning software but became popular for its ability to create and load virtual disc images.
The Alcohol 120% is also known for this ability to read from scratched or damaged discs. It allows you to create upto 31 virtual drives and has a support for wide range of operating systems, supporting Windows 2k, XP (x64 / x86), Server 2k3 (32bit / 64bit) / Server 2k8 (x86 and x64), Vista (x86 and x64), Windows 7 (32bit / 64bit).
One may obtain a time limited trial version of this software before purchasing the full version at Euro 40.
PowerISO (Paidware)
Another software originally made as a CD / DVD burner, but have succeeded more as a mounting software.
Although the software itself is a paidware but the actual mounting support is given free as an add-on download. The software supports a wide range of imaging format, including .DAA (Direct-Access-Archive is an advanced format for image file) files. This is the only software in this list which supports Windows 98 and Windows ME along with all above version of windows, both 32 and 64bit.
The software retails at USD 30 and allows a time limited full featured trial via their trial download given at their website.
MagicISO (Paid) / MagicDisc (Freeware)
Once again another burner turned virtual drive software. The MagicISO provides a free independent add-on called MagicDisc.
The software retails at around USD 30, where as the MagicDisc is offered free. One may also try out their trail version of the burning software MagicISO.
MagicISO / MagicDisc supports almost al versions of Windows, starting fro Win98 to 64bit version of Win7 and Server 2k3 R2 (Beta).
Virtual Clone Drive (freeware)
Arguably the best free solution available for virtualizing the CD or DVD image files. It supports almost all imaging format like ISO / Bin / CCD and allows you to create upto 8 virtual drives.
One of the popular feature of this software would the context menu add-on which allows you to mount or unmount an image file by just right clicking on it.
The Virtual CloneDrive weights just a couple of MB and can be downloaded free. It supports Windows 98 to Windows 7 including both 32 and 64bit version of it.
By the way, what are the use of these software in real life computing ?
It is possible that the question may pop up to those who are not used to using virtual disc drives, as whats the purpose of these software.
Now days, as we have bigger hard discs, would not it be easy to make an image of the disc you need and keep it in your hard drive. In that way, you can avoid physical ways of changing discs from drives and in case you are a notebook user, then you don’t have to carry so many discs either.
Just one thing to keep in mind. Not every End user license may allow you to make an image of your disc.

If you know about any software supporting Windows 7 (x64) which I have missed to list here, please do post a comment to let me know.
mountthis on December 8th, 2009
Here’s another, paid, variety. I’ve used all those listed in the article. Winmount is my current favorite.