The idea behind running in a VM (virtual machine) is to isolate problems. As
far as the person on the other end would know is when they are looking at
your computer they would see the VM and any contamination would be limited
to the virtual machine and not your computer. VMs are used for many
purposes. They are easy to setup, copy, move, etc. When you connect to the
internet you do it through the VM (client) and not your usual browser on
your real computer (host).

You need an application that creates VMs. I use Virtualbox from
virtualbox.org. It is also available in the repositories, but that version
has fewer features (such as no usb). It is better to get it from Virtualbox.
It is free either way. Then you use an install CD or ISO of an operating
system. Instead of installing the OS to your hard drive, you install it to a
virtual machine and this creates a virtual computer within your computer.

To use a VM you need a fairly recent computer with a decent processor and
some RAM. My four year old single core HP with 4 GBs of RAM is more than
enough to run XP in a VM, so we aren't talking about having an expensive
computer. You give the VM some of your HD space, some RAM and video memory
and install. It is quite easy and even fun. You should also consider closing
all ports except those which you need through a decent firewall. All distros
include hardening utilities that you can install above and beyond the usual,
plus there are some distributions that are dedicated to running securely.