Xephyr - Multiple nested X sessions
If the title of this article sounds like something from Star Trek, you're not far off. It's a very geeky thing, which allows you to export X (GUI) applications as separate entities on top of your desktop. Indeed, Xephyr is an X server utility. As such, it allows you to manage your virtual consoles, without leaving the safety and comfort of your desktop.
What is Xephyr good for?
Well, except for impressing girls with your omnipotent computing skills, you can use it for development of applications, demonstration of tools and secure forwarding of X sessions without VNC.
This article is referenced from a very nicely written tutorial at Ubuntu forums, by bodhi.zazen. Most of the critical information is there, I've just polished it a little, added some extra examples and a sprinkling of screenshots.