It can be done by something called as Vbox .VirtualBox is a general-purpose full virtualizer for x86 hardware. Targeted at server, desktop and embedded use, it is now the only professional-quality virtualization solution that is also Open Source Software.

You can download it for you flavour of Linux from here : Linux_Downloads

Steps to install Vbox for Ubuntu 8.10 :

{Copy paste and hit enter line by line in your terminal}

Small Script that might help you :

#!/bin/sh

# Backup the sources.list

sudo cp /etc/apt/sources.list /etc/apt/sources.list.backup

# Create a new file ending in 'sources.list' in the '/etc/apt/sources.list.d' directory

sudo echo 'deb http://download.virtualbox.org/virtualbox/debian intrepid non-free' >> /etc/apt/sources.list.d/vbox.list

# Add a public key

wget -q http://download.virtualbox.org/virtualbox/debian/sun_vbox.asc -O- | sudo apt-key add -

#Update your sourcelist

sudo apt-get update

#install dkms and virtualbox-2.1

sudo apt-get install dkms

sudo apt-get install virtualbox-2.1

sudo virtualbox&

Copy this to a file , call it vbox.sh , chmod 777 on it and "sudo su" then exec it as ./vbox

Thats it you must find the Vbox , running in front of you !!

You can see loads of screenshots here : Screenshots

To setup an OS , say XP : SlideShow

In the last slide , select either the CD/DVD ROM or an ISO image from you HDD ,click ok and start Boot, install and enjoy :)