I've experimented with a wide variety of virtualization software in the past, but have recently settled on two. VMWare, VirtualPC, and others may have their uses, but I've found VServer and Xen to be my new favorites. Not only are they both free, but they also offer near-native performance. VServer makes it incredibly easy and fast to set up new guest systems, but also can meet more complex requirements with some additional minor configuration. The only feature that VServer can't provide is the ability to run Windows, but Xen will on any processor that can do hardware virtualization, or HVM (Intel's VT or AMD-V will).
Since VServer is easier to use and faster to setup for general Linux virtualization, and Xen can run Windows, the need to use both quickly becomes apparent. They both require kernel patches to work, but a well-oiled Debian setup makes that as easy as running apt-get install. One thing I would suggest is to use LVM – it makes giving guest machines disk space easier. Assuming you have a box already set up running Debian Etch, just apt-get install the following packages and you're well on your way to virtualization with Xen and VServer:
apt-get install libc6-xen xen-hypervisor-3.0.3-1-i386-pae xen-ioemu-3.0.3-1 xen-linux-system-2.6.18-4-xen-vserver-686 xen-tools xen-utils-3.0.3-1 xen-utils-common bridge-utils linux-headers-2.6-xen-vserver-686 linux-image-2.6-xen-vserver-686 util-vserver vserver-debiantools vncserver vnc-common
For more information, check out:
Note: The first two links describe installing Xen and VServer separately — the only change required to use both is to grab the -xen-vserver kernel packages instead of only -xen or -vserver alone.