To understand how MSBuild works with Visual Studio 2008, you must know the difference between a Toolset and a Target Framework, and how each relates to the new ToolsVersion attribute. These are all used to determine how MSBuild 3.5 builds your projects.

<TargetFrameworkVersion>v2.0</TargetFrameworkVersion>

<Project ToolsVersion="2.0" ... </Project>

Differences Between .NET Framework Versions

To create a project, Visual Studio 2008 requires a Toolset. MSBuild locates targets and tasks using the $(MSBuildToolsPath) property. For example, MSBuild finds the Microsoft.CSharp.targets file by using the following XML element:

<Import Project="$(MSBuildToolsPath)\Microsoft.CSharp.targets" /> 

Microsoft.CSharp.targets is an example of a language-specific build process used by Visual Studio 2008 for building Visual C# projects. $(MSBuildToolsPath) resolves to the path of the appropriate version of the .NET Framework where Microsoft.CSharp.targets is installed (for example, C:\Windows\Microsoft.Net\Framework\v2.0.50727).

Before the MSBuild 3.5 Toolset can build this project, it must resolve $(MSBuildToolsPath) to the installation location of MSBuild 3.5 so that the Toolset imports the Visual Studio 2008 version of Microsoft.CSharp.targets.

Depending on the ToolsVersion, $(MSBuildToolsPath) gets a different value, causing it to import a different ToolSet based on the ToolsVersion value. This flexible system lets the project, MSBuild host, or user specify the Toolset that a project should be built with, and also specify a way for MSBuild to use the location information to pick the correct Toolset.

When you create a new project, or upgrade an existing project in Visual Studio 2008, an attribute named ToolsVersion is automatically included in the project file and set to a default value of "3.5". For more information, see Targeting a Specific .NET Framework.

When a ToolsVersion value is defined in a project file, MSBuild uses it to determine the values for $(MSBuildToolsPath) (or $(MSBuildBinPath)), which is the path of the MSBuild tools. If a ToolsVersion value is not defined, MSBuild continues to use the old Toolset path because it assumes that the project is a Visual Studio 2005 project.

If you open an existing Visual Studio 2005 project in Visual Studio 2008, the project is physically "upgraded" to include "ToolsVersion=3.5" since Visual Studio 2008 only supports building with the 3.5 toolset. As a result, when you build the project in Visual Studio 2008, it will use the Visual Studio 2008 Toolset (3.5) instead of the Visual Studio Toolset (2.0).

Projects created by using the 2.0 Toolset can target the .NET Framework 2.0, and projects created by using the 3.5 Toolset can target versions 2.0, 3.0, or 3.5 of the .NET Framework. Even if a Visual Studio project has been migrated to Visual Studio 2008 and upgraded to use the 3.5 Toolset, the Target Framework for the project will continue to be .NET Framework 2.0. This design guarantees that when you migrate your project to Visual Studio 2008, it will not introduce new dependencies. The project continues to build exactly as it did in Visual Studio.

Note:
If ToolsVersion is already defined in a project, Visual Studio 2008 will not change its value. The ToolsVersion value can be overridden. For more information, see Overriding ToolsVersion Settings.

Visual Studio 2005 cannot open or build Visual Studio 2008 projects, or projects upgraded to Visual Studio 2008. But the MSBuild 2.0 toolset may be able to build your Visual Studio 2008 projects if you have not used any new functionality that is specific to Visual Studio 2008 Toolset such as LINQ, new Visual C# 2008 or Visual Basic 2008 syntax features, and so forth.

Concepts