It's rather different. With a VM like Virtual PC or VMWare you are running the guest OS on the host OS.
I'll focus on virtualization, since you probably know how an OS runs natively on a machine. Under virtualisation there are several positives and a few negatives. Negatives include reduced performance, since the guest OS is being run as a process on the host and reduced capabilities. Graphics cards aren't yet well virtualised, so virtual machines can't use them well and the graphics take a pretty big hit in virtual machines. Don't expect to run games on them. Memory and processor usage, while not as good as on a normally installed OS is pretty good nowadays. Another negative is the added boot time, since to launch a virtual machine you have to launch the host and then the VM.
As for positives, the virtual machine is isolated from the host OS. If it gets infected it's quite easy to simply reinstall. Most recent virtualisation programs allow the state of a virtual machine to be saved, and you can even save several states and load up whichever you want. Virtualisation also allows you to run an OS on hardware it shouldn't be able to run on. Like say Mac OS on a typical PC. And virtualisation allows you to run two (or more) OS's simultaneously, which if you are a programmer or web developer, allows you to quickly test and deploy solutions on different platforms.
I'm pretty sure I could think of more, but that should get you started.
