Once wubi is installed it runs from the hard drive. It sets up a loopbacked
device that loads the virtual installation of Ubuntu and sets it up as a device
which is run from the Windows bootloader. You can do anything from wubi that you
can from the regularly installed Ubuntu since it is a full installation, but
virtualized. You can access all of your drives, play CDs and DVDs and install
programs. It saves your changes from one session to the next just as the regular
Ubuntu does. If you don't like wubi you just uninstall it from the Control
Panel. If you like it you can transfer it to another partition using a separate
utility called LVPM (https://code.launchpad.net/lvpm). It has more functionality
that the Live CD and it gives a better feel for what Ubuntu is like because it
is much faster than the Live CD.

There are advantages and disadvantages as with anything. For someone determined
to use Ubuntu use the regular approach from the live CD, but for the casual
user, try wubi from inside Windows. Also wubi only works with Ubuntu, so if you
want to try another distro then you cannot use wubi.