There is good news on the horizon... which is that Linus Torvalds has merged the KVM code - which is the Kernel Virtual Machine Module in the kernel source tree leading to Linux Kernel 2.6.20. This opens up a lot of avenues as far as Linux is concerned. Using KVM, it is possible to run multiple virtual machines running unmodified Linux or Windows images.
KVM is not the only technology that is around as far as Linux is concerned. But its advantage over other similar technologies is that it is a part of Linux and uses the regular Linux scheduler and memory management which in turn makes it much smaller and simpler to use. It uses slightly modified userland tools that comes bundled with QEMU to manage virtual machines. But the similarity ends there as QEMU inherently uses emulation where as KVM makes use of processor extensions for virtualization.
A normal Linux process has two modes of execution - which is the Kernel mode and the User mode. When you use KVM, Linux will have an additional mode which is the guest mode which in turn will have its own kernel and user modes (see figure below).
On the down side, for KVM to function properly, your computer should have Intel or AMD processors which supports integrated virtualization technology in the hardware level.
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