Creating a Virtual Machine (VM) is the answer to your problems!
What you need:
1) A computer with a processor that supports Virtualization.
2) At least 8-20 GB of disk space(depends on what OS you are installing) and 1 GB of RAM.
3) Installation Media: You must have the CD/DVD or the .iso file.
4) If you are creating a VM that runs Windows you will need the Product Key.
5) An internet connection or the VirtualBox installation file.
NOTE: Virtualization does not fully support graphics intensive programs. You may or may not be able to play games or run certain programs using a Virtual Machine.
There are several applications that allow you to create a Virtual Machine. For most users I recommend Oracle VM Virtualbox. This software is free, open source, and multi-platform.
Step 1: Download and Install VirtualBox
Keep all of the default settings.
You will be prompted to install several Oracle components. Install all of them.
Step 2: Create a Virtual Machine
Enter the Name of your VM. This is how you will identify it in VirtualBox so name it something meaningful to you.
Select Type and Version. This depends on what OS you are installing.
Step 3: Allocate Memory
If you are creating a Windows VM I recommend at least (1-2 GB)
If you are creating a Linux VM I recommend at least (512 MB)
NOTE: Stay within the green target amount.
Step 4: Setup the Hard Drive
Otherwise select "Create a virtual hard drive now."
Step 5: Select Hard Drive File Type
The VM will be stored in a single file on your computer with the .vdi extension.
Step 6: Select Storage on Physical Hard Drive
NOTE: "Fixed size" may have a slightly better performance, but will take up more space on your computer.
Step 7: Setup File Location and Size
Depending on what you want to do with the VM you may want to select a bigger size.
NOTE: This will take up space on your computer. Do not select more space than you are willing to give the VM
You have created a VM. Now you need to install an OS on it.
Step 8: Install the Operating System
Browse to your installation media or .iso file.
The actual installation process will depend on which OS you are installing.
Step 9: Install Guest Additions
NOTE: You must install guest additions in safe mode (Windows) to enable 2D and 3D acceleration.
Boot in Safe Mode.
Instructions for Windows XP
When you have booted in Safe Mode, click Devices --> Install Guest Additions
Follow the Prompts and Install.
Shutdown the VM.
Step 10: Update Settings for 2D and 3D Acceleration
Check both 2D and 3D acceleration.
Increase Video Memory (I recommend 128 MB)
Start your VM.
Congratulations. You now have a functional Virtual Machine.
NOTE: Right Ctrl-F will toggle between Fullscreen and Windowed.