If you are a web developer, virtual hosts is probably something you already use, if not, you should.
Virtual hosts allow you to have multiple domains configured in your computer so you can have different web sites in different locations on your hard drive and keep your environment better organized when developing. Virtual servers are also used by shared web hosting companies to host multiple web sites in the same machine, the difference is that they deal with a bunch more stuff that I am not going to deal with in here. This guide should only be used to create virtual servers for local development.
I am currently using Ubuntu 11.04 (Natty Narwhal) but I am pretty sure the instructions are the same for other versions of Ubuntu. Other Linux distributions not based on Debian have a slightly different folder structure, but you should be able to adapt this guide easily.