Leslie,
A virtual PC is just that. It is an ACTUAL PC located on another PC. If one has enough memory, you can run as many PCs as you wish on a PC. So, say you have XP or whatever. You can install VMWare Server or VMWare Workstation (~$295.00), Microsoft Server 2004 (cost), and now Microsoft PC 2007. Downloadable for free. I believe Vista comes with it.
Once installed, you use the wizard to pick a certain part of your free hard drive for your virtual PC. You then install, say Vista or SBS 2003 or whatever, and you have an ACTUAL computer running inside your computer. This computer will build actual video cards, sound cards, NIC cards from the software you use. Then you actually install Vista or SBS or whatever into the little "hardware" shell you have created.
OK, what is it for? Many things. You can try out OS you may wish to purchase. For instance, if I tried out Vista, I wouldn't buy it (sorry Adam -- it works for him). You can use it to run legacy software -- software that won't run on Vista (if that's your actual computer. You would have XP Pro as a virtual machine and you could install the software there and it would run there like it was on Vista. You can set image points, so you can go back to exactly where you were. Yes, you can do this with System Restore, but it is a heck of a scarier task to try out software or changes on your "real" system than on a virtual PC, where you wipe it clean and start over like a chalk board. Another use if for tech support. Say, they are supporting Amazing Charts, and you call in and say I am using Vista. They simply bring up the Vista virtual machine and run Amazing Charts from there. You can do ANYTHING you can do with a real machine including networking. You can even sync to a similar program such as AC and if the other computer has issues, you can run the VM. Of course, if it stops or crashes, then it will do you no good.
I am hard pressed to see how it will help others log in. Before I totally dismiss it, I suppose you could run two other XP VMs on an XP Pro machine and use the VMs for different people. But, the hurdles would be many. While, you do have virtual NIC cards, you would need to configure the VMs with your "real" NIC card. Plus, each machine would only have a certain amount of designated RAM, say 512MB, so you have a slower machine by far. There is a bit of a learning curve for those using it but not after it is minimized.
I suppose if you were stuck with not enough machines and you didn't want the hassle of logging in and logging out, but it would seem to be a huge undertaking to just have that benefit. I would rather just click on File -> Logout and log back in. Or use Windows XP Pro faster user switching, although I have to admit I despise that.
So, that is the ins and outs of virtual machines. It's fun. I suggest when you are bored you can play with it. You can use VMWare or Microsoft Virtual PC 2007.