I was checking out Virtual PC 2004 today, and I was shocked as to how awesome the software is.
Virtual PC 2004 allows you to create Virtual Hard Disks or VHDs. You can load any operating system onto the VHD via Floppy, CD, DVD, or even an ISO on your local system.
Once you've loaded from one of those media, you can boot the operating system. The operating system can detect any devices that are connected to the system, and can mount any one of them. The OS that you boot can also bind to its own IP address on the network interface, seperate from that of the host machine. It can even use the network interface when the host operating system has the interface disabled.
Once you have loaded the operating system onto the VHD, and have done what you please with it, you can save the current state of the machine, or shutdown. Saving the current state is almost like hibernating on a normal Windows XP installation. The virtual PC will save all of the current information, and then shut itself down. You can resume it instantly whenever you please, without having to allow the operating system to 'boot'.
I installed a few operating systems on my various VHDs. I installed the actual Virtual PC host program on a copy of Windows Server 2003 Enterprise that my brother and I use for testing and development purposes (which my brother recives from his MSDN subscription). Officially, it is only supported on Windows 2000, and XP Professional.
Here are the results (used .bmp to maintain quality so they're rather large):
XP Profession Debug/Check Build Damn Small Linux PHLAK Windows XP Media Center Edition 2005