Rather than set up a multiple boot system where you select the operating system to run on your computer when you first start it up, a virtual environment allows you to run multiple operating systems on your computer all at the same time. Virtual PC from Microsoft is one of several programs that is available that allows you to set up a virtual environment in which to run multiple operating systems on your computer at the same time.
Why would you want to do this? Well being able to start up s separate operating system on the same computer without needing to reboot is certainly easier than having to shut down everything that you are currently running, reboot to run the other operating system and then reboot to swap back when you're done. Where you want to be able to access another operating system either for prospective future use or because you have some old software you occasionally need to use that will not run on your current operating system setting up a virtual environment like this is ideal.
One use that is not so obvious is that all web developers really need this type of setup (unless they have multiple computers available) because it is the only really effective way to be able to check that your web pages actually work properly in the various versions of Internet Explorer. Microsoft make it easier for people with this requirement to uuse Virtual PC rather than any of the alternative virtual software options by providing hard drive images with each of the common IE versions preinstalled. All you need to do apart from downloading and installing Virtual PC in the first place is to download the disk image for each version of Interent Explorer that you don't already have installed and create a new virtual environment that boots from that image. To test in that IE version is then simply a matter of starting that environment running, opening the browser, and testing your pages. I installed a test environment for IE8 that way and the only configuration needed was to set up the networking options to provide the browser with internet access.
Virtual PC is also the obvious choice for virtual envirnment software where you wish to run versions of windows or OS/2 as the software is specifically set up to handle those Microsoft and IBM operating systems. Simply select the appropriate operating system when creating the virtual environment and it will allocate appropriate sizes for everything. You then just start up the environment and install the operating system just as you would if installing to a new PC. I have set up both Windows NT4 and OS/2v4 environments this way and the only issue that I had was in trying to install fixpacks onto OS/2.
The one group of operating systems where it isn't the best choice is Linux. If this is the only operating system that you need to install then you will probably do best to select different virtual environment software in which to load it. At least some versions of Linux can be successfully installed into Virtual PC so if you need Linux as well as some of the other options mentioned above then it is still probably the best choice. All it means is that you need to override some of the options that the installation uses from the defaults to values specific to Virtual PC. These values may nnot be all that obvious but if you search the web you will find a number of pages that have been written that outline the options that some people have used to successfully install Linux into Virtual PC.
One aspect of installing into Virtual PC that is easier than a from scratch install is that it is possible to do the install directly from an ISO image stored on your hard drive rather than needing to have a CD to install from. If you have downloaded your operating system rather than purchasing it on CD this saves your having to burn a CD first.