Most current Linux distributions come on bootable CDs that auto-launch into a graphical installation/setup program. For these distributions, installation on Virtual PC is especially easy. Simply create a new virtual machine, insert the main disc into the CD drive, and start up the newly-created PC.
If Virtual PC fails to boot from the CD, you probably need to create a Linux boot disk. Boot into DOS and use the utility program included on most Linux distribution discs to create a boot floppy. I recommend creating a floppy image (using the Virtual Disk Wizard) rather than using a real floppy.