The ArcGIS JavaScript Extension for Virtual Earth uses standard services created with ArcGIS Server. A few special considerations apply when creating map services that you intend to use with this extension:

• When you author the map in ArcGIS Desktop (ArcMap), you must set the coordinate system of the map's data frame to WGS 1984 Web Mercator.
• After you publish the map to an ArcGIS Server map service, you must create a cache for the map. This extension cannot use dynamic map services.
• The cache must use the tiling scheme for Microsoft Virtual Earth and Google Maps. You can load this tiling scheme in the cache dialog.
• The cache must be a fused cache, meaning one image per tile area. The VE extension cannot use services with a multi-layer cache.

Other design and caching considerations should be taken into account as well. See this page for detailed instructions and discussion: Designing a map to overlay Google Maps or Microsoft Virtual Earth (this page is also available in the ArcGIS Server Help, if you have a local install).