The principle benefits of virtualisation stem from its portability. An entire virtual machine is a single file on the host system's disk drive. This makes backing the whole thing up fast and very easy, and means that the entire system can be transported to another host with very little downtime. Any system that can run the virtual machine software can serve as a host. The host operating system can be Windows, Apple or Linux.
A virtual machine offers a great sandbox for trying out new software (or indeed development and support). Some are even used for safe Internet browsing - if you get infected by something you can restore to the last backup in a matter of seconds with no harm done to your host system. You can maintain point in time copies of virtual machines and run multiple copies, simultaneously if you like.
VMWare have long been the leaders in virtualisation and they have patented the snapshot ability, where a virtual machine can be backed up very quickly without interruption. This makes VMWare the choice for those wishing to run servers virtually.
Those wishing to run different or multiple operating systems on their desktop have a new choice in Parallels. This was the first product to take advantage of new hardware virtualisation features in modern processors, and the first to be offered for use on Intel based Mac systems.
Parallels Desktop for Mac allows you to run any PC operating system on a Mac, and does a particularly good job with Windows XP. I was shocked when benchmarking to discover that it does some things, particularly disk and network access, even faster than Windows XP natively.
Most business applications run considerably faster using Parallels on a Mac than they do on a Windows PC.

A Medical Director File Repair running on Parallels inside Mac OS/X. This completed in a quarter of the time it took running natively in Windows on the same computer! The bars at the bottom left show processor use - note the efficient use of both cores of the CPU.
There are a number of things that don't work or run at full speed inside a virtual machine. The most notable of these is graphics ability. Your Parallels Windows installation will only have access to a generic video card driver with 8 MB of memory, so gaming and 3D design are not yet supported. Parallels report that a better utilisation of the video power of the Mac is coming soon.
The release of VMWare for Intel Macs is called VMWare Fusion. It's in early beta at the time of writing, and only available in debug mode, which results in rather sluggish performance. It would not be fair to compare this with Parallels. I have instead compared performance between running Windows natively and inside Parallels on the same computer.
I first used Passmark software's benchmarking tool to compare the performance of Windows running on Parallels with Windows running natively using Bootcamp on the same Mac. The results are stunning.

Benchmarks except Network compare Passmark scores on the same Mac. Network speed was the average of small, medium and large FTP downloads. As you can see, both disk and network performance are nearly twice as good under Parallels. 2D graphics are a little better, memory a little worse. I'm not certain that the CPU comparison is accurate - Passmark may not be measuring the dual-core properly when running virtualised.
The next tests were done using a real database and Medical Director (2.88). All results listed are the average of five tests. So MDW2 runs better under Parallels in each case. I also did a file repair but the numbers wouldn't fit on the chart - Parallels came in around 400% faster than Windows running natively.

Alternatives
There are other way to run Windows on a Mac. You could access a Windows Terminal Server from a Mac. This is a great solution for those wishing to use an alternative to Windows on a network of desktops.Bootcamp is an Apple release that allows you to install Windows natively on your Mac, but will require you to reboot to access it.
For the technically adventurous, there are technologies like WINE and Crossover that modify Windows programmes to run directly on a Mac or Linux.
Notes
Parallels and VMWare will only run on an Intel based Mac. The same performance gains are available using a Linux host. I recommend at least 1GB of RAM to provide adequate performance.You still need anti-virus software on a virtual installation of Windows. You also need a licensed copy of Windows to be legal.