Sophos software has recent.y made their Sandboxie software free for personal use and will soon be making it open source. For anyone unfamiliar with Sandboxie, it implements an isolated enviroment where you can run programs (even install them) without fear of affecting your system. When you run a program from within a sandbox, any files, registry settings, etc. are made within the sandbox. For example, if you save a file to the desktop, it will appear in the Sandboxie desktop (with an option to move it to the actual desktop).
This is a much more convenient way to test new software than creating a virtual machine. It takes up far less space (and takes less time), and you can see how the software interacts with your actual system rather than a (not always identical) virtual one.