Parallels 7 allows you to install OS X Lion as a virtual machine (provided you're running OS X Lion as your root operating system). Parallels does this through Lion's restore partition; once the installer starts, it downloads Lion from the App Store, and creates the virtual machine. This means, though, that if you're without an internet connection, you won't be able to create a Lion installation, even if you have the installer file.
I installed a virtual Lion on both my 2006 vintage Mac Pro and the MacBook Pro, and found that they worked as expected, with a few caveats. I was unable to copy and paste text or images to or from the virtual machine to the host OS--odd, given how well this works in Windows (as well as Unix) guests. When I tried to do a video chat in iChat, the camera window opened as a black box, and iChat then crashed. This also happened on my Mac Pro, with its FireWire iSight camera. When running FaceTime, however, the camera worked fine.
I also had a problem with the mouse click location being offset from the actual pointer location; this seemed to crop up when switching between full-screen and windowed mode. Virtual OS X setups also lack multi-monitor support, and there's no OpenGL acceleration, so forget about running anything that requires accelerated graphics.
But for general usage, such as testing software in a safe way, or testing as a user without any login items, being able to run OS X Lion in a virtual machine is great.
To help manage your installed virtual machines, Parallels presents them in a list, showing each one's status and a live screenshot (if active).
You can also configure, start, and remove virtual machines via a control-click, but doing so doesn't actually highlight or select the virtual machine you clicked on. On more than one occasion I went back and confirmed my control-click, just to make sure I wasn't removing the wrong virtual machine. (There is a confirmation dialog, but it doesn't include the name of the virtual machine to be removed, so it's not much help.)
The bundled downloads of Chrome, Ubuntu, and Fedora all work well; you can even use the Linux guests in Parallels' Coherence mode, taking away the "desktop" interface and presenting Linux windows intermingled with OS X windows. I was also able to download and install various Linux distributions using their .iso files without any troubles. Parallels supports accelerated OpenGL graphics in Linux, unlike Fusion.
Parallels offers an incredible number of settings, both for the application itself and for configuring your virtual machines. If you like tweaking your settings, this is a good thing. If you're the type who gets intimidated by too many choices, this may be a bad thing. Thankfully, the preferences panel has been redesigned, and is now much more Mac-like, making it somewhat easier to find things.