I use Oracle VirtualBox for VM's. The primary reason when I started using it is that it is open source and installs its own virtual machine so you can run VM's on non-professional versions of windows. I'm not sure that that Microsoft restriction is still in place with Win 8.

I use it for test, but install my development tools in my base layer operating system. However, some things (android dev) I setup in their own VM.

I still haven't gotten to the point where I don't install anything in the base layer operating system, but I hope to get there at some point.