Just to add another alternative to the discussion --
http://wubi-installer.org/
I've actually tried this under WinXP and Vista. The Wubi installer will either automatically download Ubuntu and install it for you (best used with a solid, fast Internet connection) or it will work with a local copy of the .iso of one of the "generic" versions of Ubuntu. (NOTE: It will NOT work, yet, with the Live CD version of the OS.)
Wubi is installed like an application. Ubuntu goes on to a virtual disk on the Windows system, not on a separate partition. You wind up with a dual boot system, with the difference being that it uses the Windows boot loader, instead of GRUB, meaning an easier removal of Ubuntu if you decide to do that. (no changing back and forth between boot loaders / no loss of the boot loader if you repair the Windows MBR for some reason) The Ubuntu installation is able to get access files in the rest of the Windows file system.
Pretty cool idea. Worked like a charm on the two systems on which I tested it. Notice that Ubuntu does NOT run in emulation here. It is a true dual boot system, just without any repartitioning or changing of the boot loader. Also note that it is danged easy (like with a VM) to do a backup of the Ubuntu operating system that gets installed. You just copy a single file to the backup target.
They are also working on a method for converting the virtual disk installation of Ubuntu created by Wubi into a standard (on its own partitions) installation.
But, yeah, virtual machine installations can be pretty cool because they obviate the need for rebooting to switch between operating systems. But VMs also tend to impose a few restrictions on hardware availability (to whichever OS is running in the VM), and the do run a little to a lot slower, depending upon the hardware.