I never knew such a thing existed but Synergy is a software-based client/server application for sharing a mouse and keyboard across two systems and it's free. Note I didn't mention anything about the video side because the video aspect isn't covered by this tool.
After some minor but clunky configuration to identify the server and tell the server where it sits physically in relation to the clients, this thing is dead easy to use: it's just like moving between windows on your extended Windows desktop except keyboard input is automatically "focused" (eg. no click required) on your moused-into computer, if that makes sense.
I've got two machines on my desktop at work: my laptop with its desktop extended to a 22" Samsung and my VPC host machine--a grunty box with a single 17" monitor. By putting the lot side-by-side I can now remove one keyboard and mouse from my desktop--a minor win but pretty cool nonetheless.
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