http://www.microsoft.com/mac/products/virtualpc/virtualpc.aspx?pid=comingsoon
You can get separate OS Packs, get VPC with an OS pack included or install retail versions of Windows. VPC behaves like a physical PC - you create a new machine, insert the boot media, start up and install. You can get a bare version and (try to) install whatever x86 OS you have. The OS packs are cheaper than the full retail versions but obviously are tied to VPC. I don't think that's as good a deal for non-XP OSes because you might give up on VPC and want to install it on real hardware. Since XP marries itself to the hardware, with it you're kind of out of luck either way.
I have had good luck with VPC 6 for OS X installing non-MS operating systems. Last weekend, however, I tried installing SUSE 9.1 and Fedora 2 on the current version of VPC for Windows. Neither worked correctly (although Fedora Core 1 had.) The setup wizard does not now explicitly include non-MS OSes so they're probably not spending much time on compatibility with them. Since VPC 7 for Mac will be the first full MS version I wouldn't be surprised to see the same thing happen. Even when non-MS OSes do work, they're not too useful because there are no accelerated "extensions" for them. The GUIs run really, really, really slowly. I have tried non-GUI Linux installations and that can work OK if you just want to run, say, Apache, MySQL and PHP.
In terms of what OS you'd want to use, if you're serious about doing any coding with MS tools then you're basically going to have to use 2000 or XP. Windows 98 may run faster but you'll find that tools like VS .NET and XMLSpy either won't install or will complain because of the lack of Unicode support. The tools channel you to the latest versions of everything. Take a look at MSDN and you'll see that it's unlikely that you'd want to try coding - especially .NET - in Windows 98. For Windows development I run XP Professional on a PC and use RDC to control it. Over wired Ethernet there is sometimes a little lag (especially at Cinema Display resolutions) but it works OK.
There's another very important limitation of VPC that played a large part in my decision to move to a physical PC - none of the dopey "activation" scehemes that I've tried work with it. If you've got some activation-protected software that you have to use then you need a physical PC.
I still use VPC for both Windows and OS X almost every day, though. I've got VMs set up with SQL Server and IIs that I use for testing. When I'm done, I just revert back to the previous state and I'm ready to go again. If you don't have to use Windows tools, you can minimize VPC to the dock, share the development folder and code in OS X. It's also great for browser testing and doing things you could probably never afford with real hardware like simulating network configurations.
My wife uses VPC on her machine (1 GHz G4 with 256 RAM for VPC) to run Quicken and Netobjects Fusion for Windows. It's a little slow - by which I mean that you'll sometimes have to wait for screen redraws. If you're a patient person, you're OK. It's hard to compare to a Pentium - my sense is that processing speed is equivalent to a Pentium II 400-500 but video performance is slower. Calculations seem to happen quickly but screen refresh can lag. If MS gets closer to native video performance with VPC7 that will be a huge usability improvement.
One last word on performance. I use Windows 2000 for VPC. I tried XP and as others have said it is incredibly slow. Slow to the extent that when you click on a menu in Visual Studio, you can pause a beat and then watch it draw itself. That's even with all the XP visual tricks turned off and with the "classic" Windows GUI. With the exact same VM settings Windows 2000 is quite useable. There really is that much of a speed difference - at least on my hardware.
