VMWare's Fusion is one of three virtualization products that I'm aware of for the Mac-the other being Parallel's product, and the free VirtualBox. Like those, Fusion lets you install an entire separate operating system inside OS X, that's running at the same time.
It's worth noting that modern Macintoshes can already run Windows and other OSes without separate software, by using "Boot Camp", which basically lets you reboot your system to switch between OS X and Windows or whatever OS choose to install. The advantage of using Fusion instead of (or in addition to) Bootcamp is that you DON'T reboot, and can use Windows programs side by side OS X programs. The disadvantage of Fusion (and all products like this) is that it can't give the OS that's running inside it full access to your computer's hardware...you'll never get as good performance from Windows running inside Fusion (or any product like this) as you will if you actually reboot to Windows through Bootcamp, so for example if you're wanting to run a game, or play a Blu Ray movie, or do video editing or something like that, you'd probably need to reboot through Bootcamp.
But for other, less processor intense software, Fusion's a great choice. In my case it's handy to use it for a financial program I use, among others.
I should note that while as far as I know, Parallels is a fairly new company, VMWare has been making virtualization products for YEARS for enterprise use. They know what they're doing when it comes to making these products work and run stably. What I wasn't sure about was whether the Fusion interface would be good from a consumer perspective...turns out it's pretty great. I've been using VirtualPC for years (originally on the Mac when it was an emulation program, and now after Microsoft bought it as a virtualization tool in Windows). VirtualPC is very straight forward to set up and configure...and it turns out that jumping in to Fusion from VirtualPC is painless. Fusion's just as easy to configure, only impressively it even handles a lot of the OS setup, which VirtualPC doesn't do.
But I'm probably getting ahead of myself... My newest Macintosh is a 2011 Macbook Air, which lacks a DVD drive. I own a Superdrive for it, and needed to use it to install Windows XP anyway, but I was impressed that VMWare not only gives you a DVD, but also a USB thumb drive in the box. Installation is typical for OS X, where you just drag and drop the program, and then launch it. The ONLY problem I've had so far with Fusion is that when I ran it for the first time, it seemed to "lock up" for quite a long time...something like 5 minutes at least. I'm not sure how long as I left for a while, and when I came back it was responsive again. At that point I just ran the auto-updater, and haven't noticed any unusual behavior from it since.
Once you run it, Fusion gives you several choices for setting up an OS. It's supposedly able to kind of migrate you from an existing Windows PC to a virtualized PC running in Fusion (though I didn't try this method). It's also supposedly able to use a Boot Camp install. My Macbook Air doesn't have much storage space, so I don't have Windows set up that way, and couldn't try that. I'm not 100% sure that this is an issue, but a possible problem with using your Boot Camp install of Windows is that every time you boot in Fusion, and then reboot through Boot Camp, Windows is "seeing" that your hardware has changed, which will trigger activation...so I'm not really sure how practical it is to use the same copy of Windows for both Boot Camp and Fusion.
The option I choose, was just to set up a new virtual machine from scratch. Impressively, Fusion detected the Windows XP disc I had in my Superdrive. The default options it selected seemed fine, and then it even prompted me for a username, password, and product key Windows would be using, so that I wouldn't have to create those during the installation. So this was actually even easier to set up than it would be on a normal install!
I walked away again at the point, so I'm not actually sure how long it took-but Windows XP was up and running when I came back. It's worth nothing that with Fusion (and any similar products, and Boot Camp), you're actually running a real full OS inside the program, so it's necessary to perform the same updates, install something like Microsoft Security Essentials, etc., just like you would if it were a separate PC. I should also note that you'll need to buy a regular copy of Windows to use inside Fusion. I happened to already have an unused copy of Windows XP, so I just used that, but if you're buying new, I'd just go with Windows 7 (probably the Home Premium version for most people).
At this point I just started setting things up like I would a normal Windows PC...ran Windows update, installed Firefox, etc. I've used it off and on for a few days now, and haven't noticed any issues. I HAVE noticed that Fusion seems surprisingly fast...it SEEMS to feel faster running Windows XP inside Fusion than inside VirtualPC.
Unlike VirtualPC, Fusion provides more modern graphics support...supposedly you get at least some hardware acceleration for Windows XP or newer, which should mean that Windows Vista or 7's graphical interface should run okay (like with OS X, Windows Vista or newer offloads processing of the graphical interface to the GPU, if you have one). Now it's still not going to give you as good performance as running on the same hardware natively...so for games, Blu Ray, etc. you'll probably want to use Boot Camp instead, but I am impressed by how snappy Windows feels compared with running it inside VirtualPC. Again, this is why I'd pick VMWare's Fusion over other products-while their Macintosh product is just 4 or so years old, they've been doing this a long time for enterprise stuff, and it shows. Of course I have a 2011 Macbook Air...the 2010 models would probably feel much slower, while a 2011 Macbook Pro would be faster.)
A few other things worth mentioning...
-Fusion installs almost a Windows Start menu up by the clock. It's kind of neat...it basically is structured similarly to the actual Windows start menu, and lets you launch programs from that. I haven't yet, but I assume you can shut it off.
-Like all virtualiazation programs, Fusion has to install some system level drivers/kernel extensions or the like. I don't like having third party software muck about with my operating system, but virtualization software has to...which again is a reason I'd prefer it be done either by the same company that made the OS, or by VMWare that at least knows what they're doing with this stuff.
-Like all virtualization programs, OSes running within Fusion use up a chunk of your Mac's RAM. Fusion by default gave Windows XP 512MB, which can be changed. Obviously that means the more virtual machines you want to run at the same time, or the more RAM you want to give to a virtualized OS, the more RAM your Mac needs...that may be a problem for the Macbook Air which doesn't have upgradeable RAM (the Macbook Pro by contrast you could easily upgrade to 8GB if need be). The "hard drive" the hosted OS sees is really a file on your real hard drive, so again, the bigger your real hard drive, the more space you have to give to the hosted OS. Fusion also lets you select the number of cores/CPUs that the hosted OS "sees". Be default, it configures Windows XP to use 1 core, but you can increase that (and of course the more of your CPU you let it use, the worse OS X may run while the hosted OS is running).
-You can also "pause" Windows, roll back changes that have been made to it, etc. Running an OS like this can actually be really handy to test out a piece of software you may not want, or for development work, etc.
-By default, Fusion configures Windows for NAT, that is it shares the Macintosh's internet connection...if your Mac is connected, so is Windows running through Fusion. Though if you have more complex needs, it's possible to set up networking differently.
I'm probably forgetting to comment on some features...and obviously a product like this is kind of impossible to test in every conceivable way, given the dozens of Mac models it runs on, the hundreds of OS configurations, thousands if not millions of programs you can run inside it, etc. But at least so far I'm very impressed-VMWare seems to have made a very stable, fast program, that to my surprise seems to be just as easy, if not actually easier to configure as VirtualPC...if you've got the need to run Windows programs without rebooting, Fusion is definitely worth checking out!