User Mode Linux, or UML, allows you to run a virtual Linux machine on a host Linux machine by compiling the kernel into a program and having it boot a file based root file system. It is of particular interest to developers and those doing DebianHosting.
See https://tracker.debian.org/pkg/user-mode-linux for status of the package in Debian.
You may check uml-utilities's README.Debian for more hints on how to use it
UML on Etch
The user-mode-linux package is currently available in Etch, and should work out of the box.
UML on Woody
An example of some scripts and building a UML on Woody.
Building your own custom UML machine
It is easy to build a UML kernel on Debian machines since kernel-package enables building a UML kernel just as easily as you can build any Linux kernel image, and the root file system can be created by using dd to build a loopback file system and populate the system using the debootstrap package. Or you may want to try a slick debian-installer based build. The links below provide examples of either approach.
http://stevieo.freeshell.org/uml/adminless-uml-d-i.html (this link is broken, try the Web Archive)
http://www.golden-gryphon.com/software/security/selinux-uml.xhtml (this links is broken, try the Web Archive)