Virtual PC/Virtualization is a simple way to test out an operating on a computer without making changes to your computer. But, it is kind of slow compared to running an OS directly from a hard drive.
Indeed, it is basically running one OS inside your current OS. It is sort of like those Emulators for running ROMs of classic games in Windows.
I think this kind of software is popular with people who use Mac or Linux to run Windows inside of Mac or Linux when they need to use a Windows software which is not available for mac or Linux.