This title is a little misleading, I figure I get to do that at least once. Yes, GNS3, http://www.gns3.net, emulates the hardware of several Cisco router platforms, and it will boot real IOS images. It's also free, easy to install, and there are abundant video and written tutorials. But you're not going to use it in your production environment.
So what's it good for? Well, there's the obvious; if you are studying for a Cisco certification test, GNS3 is like a dream come true. Though there have been Cisco emulation packages around for a while, they are usually expensive, and only provide a small fraction of the IOS feature set.
But even if you're not studying for an exam, or have no interest in Cisco IOS, GNS3 is a fantastic tool for testing network and service architecture designs. When used in combination with VMware Workstation, connecting your virtual machines up with a GNS3 topology takes about three clicks. In the simple diagram above, I've connected two VMs across a virtual WAN link, utilizing two Cisco 3640 routers and OSPF as the dynamic routing protocol. The computer shapes are really cloud objects that I've customized the shape for. When you configure a cloud object, the vmnet virtual networks appear in the drop down list of available NIO Ethernet objects. To connect a virtual machine to a GNS3 virtual router, just add the virtual network the VM is plugged into in the cloud configuration window, and then create a Fast Ethernet connection to a router.
The mind boggles at the thought of all the projects you can test with this setup. Imagine being able to test a change to the Active Directory infrastructure between multiple WAN sites, or verify client connections after changing from a static routing configuration to OSPF. A few months back I completely modeled a client's network infrastructure using GNS3, and proved how they could reduce their routing tables by about 10,000 entries by configuring EIGRP route summarization on a single link.
If you are running a recent version of Ubuntu on your demo laptop, installing GNS3 is as simple as
sudo apt-get install gns3. The install is pretty painless on XP as well, and possible on Vista (though I've read of folks having a lot of issues), but GNS3 runs a lot slower and you won't be able to run as many router instances with XP or Vista.
My current demo laptop, a Core2 Duo T9600 running Ubuntu 9.04 64-bit, VMware Workstation 6.5 and GNS3 is the coolest thing since sliced bread. And I would know, because I eat a lot of sandwiches.
Oh that's bad..... but it's true, I do eat a lot of sandwiches