There are two formats provided by Microsoft, when its gets to deploy OS images: WIM and VHD. Of course there are much more formats provided by 3rd Party tools such as Ghost or Acronis, but these most often come with additional fees for the corresponding tools.
Looking at the Microsoft formats there are two big differences. WIM is a format purely created for deployment, while VHD is Microsoft’s disk virtualization for Virtual PC and the Hypervisor.
Due to this, WIM is most often used to deploy an OS image in factory or field. It supports compression and, as a very nice feature, single instancing. This means that files of different OS images that are stored into a single WIM file are only persisted once, even if they occur in two or more of the images captured.
This is great to save significantly space e.g. on a deployment or recovery DVD. In addition WIM supports offline servicing using a tool called DISM, which provides flexibility around all maintenance tasks.
Despite the fact that VHD supports compression it was not intended to be a deployment format. Instead it is a virtual hard disk you can store on the physical file system of a device as a single file. Due to this, it has no real maintenance features such as single instancing or great offline servicing capabilities.
It nevertheless can be used for deployment, as well, because copying over a VHD file onto device is a simple process. Due to the fact that WES 7 is able to boot directly from a VHD file, which has been mounted as a disk using the Diskpart utility on Windows PE as maintenance OS, this will work quite fine.
Do not get it wrong, this is no virtualization as provided by Hypervisor in Windows Server, just the ability to boot from this virtual disk format!
There cannot be a general best practice, when to use which format, because the choice is quite dependent on project requirements.
WIM has quite some advantages in pure deployment scenarios, but VHD is able to score when a device e.g. needs to be able to cover different roles. In this case the deployment of several VHD files onto the devices hard disk can be an interesting approach. Because then, by choosing/configuring the desired OS for a role from the boot menu, the device has the flexibility to be whatever needed, whenever needed.