I purchased VMWare last month after using the trial version.  I highly recommend it.  It allows you to create virtual images of operating systems/software installs much like Norton's Ghost or Acronis True Image.  The difference is it runs the images in a virtual machine right from your current version of windows. 

The program is easy to use.  Once you have the software installed you say you want to create a virtual image and it will then map your cd drive (you select which one) to be used as the installer of the new virtual os.  You install the new os in the VMWare window just like you would if installing the OS on your pc (only now you're installing it within a window on your current windows).  VMWare stores the OS image in a folder with a few files making management of the image easy to move/relocate/backup. 

Once you've built an image you can then make a clone of it, so that way you can build different operating enviornments for testing/playing around in.  For instance keep one copy as a fresh machine, install .net on another clone, and install office or other common tools on another clone.  This makes it very easy to setup test environments with software your clients are likely to have so that you can better debug/diagnose software incompatibilities or to create a junk machine as a honey pot for hackers or to mess around with yourself.  With the OS images you can have them save the state of the machine at anytime by taking a snapshot or just have the image always revert back to the way it was before you booted into it and played around.  You can have multiple snapshots per image and jump to anyone of them at will so you can easily jump back and forth between different states of the OS image. 

Finally VMWare integrates into Visual Studio allowing you to test your program against an image.  This way you can test against Vista or Win98 or some other platform/configuration you don't have installed yourself.  You can even make a video of your session in an image.  The images load quickly and even if needing to do some lengthy tasks the image is running in a window so you can minimize it and continue working on stuff on your main desktop until the image finishes it's task.