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Here at Puget Systems, we often talk to people who are interested in running multiple operating systems on the same machine. Windows 7 and XP, sometimes it's Windows 7 and Ubuntu Linux; pretty much any combination is possible. There are actually several ways of achieving multiple usable operating systems on a single PC, I just want to provide a short comparison between the two configuration types we most commonly discuss with our customers.
Traditional dual boot
One of the most common ways to achieve multiple usable operating systems on a single computer is known as 'dual boot'. This refers to a custom boot loader configuration on your primary drive which allows you to select an operating system during startup. This method can actually be extended to 3 or more operating systems installed on the same machine, although I'm not aware of many people actually doing so.
Desktop virtualization is a newer way of running multiple operating systems on one desktop system. Desktop virtualization requires a virtualization program such as Oracle's VirtualBox ($0), VMWare's VMWare Workstation (~$200), Parallels' Parallels Workstation (~$50), or Microsoft's Virtual PC ($0). The virtualization program is installed on your 'host' or primary operating system, and then your 'guest' operating systems are installed within that application.
Overall, if you need a second operating system on your machine, I highly recommend a virtualization solution if you can deal with the few drawbacks mentioned. Dual boot is generally much more of a hassle to keep working, and I find that when a reboot is required to change between operating systems, people are more likely to just standardize on one operating system and never use the other.