These screenshots talk through setting up a virtual machine (Ubuntu Guest running on Ubuntu host).
Creating a new Virtual Machine
Click New to start the "Create New Virtual Machine" Wizard.
Specify a virtual machine name and operating system type.
Specify an amount of RAM to dedicate to this virtual machine when it is running.
Either choose an existing image, go and find one with the Existing button, or press "New" to start the "Create New Virtual Disk" Wizard.
Creating a new disk image
Assign the image to the virtual machine
Back in the "Create New Virtual Machine" Wizard.
Summary page is then shown.
Details page shows the settings for this Virtual Machine.
Attaching a CDROM image
In the Details tab (in the left), click Storage.
Under Storage Tree (in the center), click the CD icon.
Under Attributes (in the right), click the CD icon at the right of the select box, select "Choose a virtual CD/DVD disk file...", browse and select the ISO image file.
In the Details tab, click CD/DVD-ROM.
Tick "Mount CD/DVD Drive" and tick ISO Image file then go find it with the select button.
Virtual Disk Manager starts. Click Add.
Explorer style dialog appears, go find the ISO image.
Added to the Virtual Disk Manager as a CD/DVD Image, choose it then click Select.
Back in the CD/DVD-ROM selection dialog.
Starting the emulator
Boot up the VM using the "Start" button.
The VM booted.
Install Guest Additions
For any serious and interactive use, the VirtualBox Guest Additions will make your life much easier by providing closer integration between host and guest and improving the interactive performance of guest systems. Among other things, it include seamless windows, shared folders, automatic mouse capture and clipboard sharing among host and guest machines.
The Guest Additions are designed to be installed inside a virtual machine after the guest operating system has been installed. They consist of device drivers and system applications that optimize the guest operating system for better performance and usability.
Search the web or the excellent VirtualBox manual for more information on how to install Guest Additions.