In a nutshell virtualization has to do with running multiple virtual "machines" on one physical machine. Not typically that useful at home yet, but very handy in a work environment where you want to run multiple environments (i.e. development, test, qa) without having to buy and house multiple servers.
There are multiple software packages out that already let you do this on today's machines - Microsoft Virtual PC, VMWare, etc. The downside is it's pretty slow on today's hardware. The virtualization talk you're hearing about these days is about adding hardware support to make it faster and more robust.