Hi Cor, welcome to the Seven Forums
Virtualization makes it possible to run so called virtual machines on your computer. Your Windows 7 system is called the host, and you can install guest operating systems to be run on virtual machines.
Here for instance my laptop's desktop just a moment ago, running three guest OS's (OpenSUSE Linux, Mac OSX and Android) on Seven host:
You need an virtualization application, or platform, to install and run these virtual machines. In the screenshot above those virtual machines are running on VirtualBox from Oracle. It is free, easy to use and configure. More information and download: VirtualBox
Microsoft's own virtualization application is called Virtual PC. You can download it, and the free Windows XP (XP Mode) virtual machine here: Windows Virtual PC: Home Page