I've used both, but I have more experience with Virtual PC. It works great for windows systems, I haven't used it as much for linux. It's allowed me to run my copies of 95, 98, 2000 pro and advanced server all fine. The real key is once you have the OS installed, you want to click under the 'action' tab in the menu and select 'install or update virtual machine additions'. This allows drag and drop copying functionality between your host OS and the virtual one, as well as removing the need to hold down alt to move your mouse out of the window.
Both great products, aimed at slightly different users in my opinion. If you have a lot of non-windows OSes, give vmware a try (it's free as well). I've also used qemu whenever I was trying out a lot of linux distros. For windows products, virtual pc is the way to go.
Edit to say: I've used virtual pc 2004 SP1, which is
a free download from microsoft[This message has been edited by kwagner (edited 09-28-2007).]