Boot Camp will give you a “native” install of Windows XP (or Vista or Windows 7, for that matter) that runs on the hardware of your iMac itself, not in what’s called virtualization, which is what VMWare does. VMWare, Parallels or other software packages run Windows as a “virtual” machine, which means it’s run as software on software, not software on hardware.
That might not make much difference for most people, but some Windows software won’t fully run under virtualization and needs to run as native. And running a Windows virtual machine is slower than a native install of Windows.
Windows under VMWare runs side-by-side with OS X. You can click over to your Windows machine while running OS X. Under Boot Camp, you’ll have to restart your iMac, but you’ll have a native Windows install that is faster and better for some uses.
Boot Camp works by using part of the hard drive of your iMac and turning it into a Windows disk that will “boot” a Windows PC, which your iMac can be, because it’s built with Intel hardware, the type of hardware that Windows runs on natively. So with Boot Camp, you can have two computers in one: your iMac can run OS X, and the Windows disk allows the iMac to startup and run Windows. After Boot Camp and Windows is installed, you will be able to hold down the “option” key on startup of your iMac and get a choice of whether to boot in OS X or Windows.
If you want to install Boot Camp, you need a Windows install CD or DVD with a valid key. The best version of OS X to have is the latest, called Snow Leopard. Look in your Utilities folder and you’ll find Boot Camp Assistant, the Apple program that will set up a Windows partition for your and help install Windows.
Partitioning is the way OS X takes some hard drive space for Windows. Boot Camp Assistant will slice off some of your hard drive and get it ready for Windows. You only use a part of your iMacs hard drive for Windows, and unless you already have lots of music, you should have the 10 gigs of disk space you need.
Be sure to print out the instructions when advised in Boot Camp Assistant, because there are some things that are different than installing Windows on the full disk of a PC, such as formatting the disk. Because you are formatting a partition on your iMac’s hard drive for Windows, not an actual PC hard disk, you need to select the correct partition and reformat that partition when running the Windows installer.
After you’ve installed Windows, you have to use your OS X DVD to install other drivers for Windows, as well as the Boot Camp Control Panel, which lets you reboot in OS X. When you’re running OS X, your Windows disk will appear in your Startup Disk list in System Preferences and you can restart in Windows by selecting a startup disk. You can also hold down the “option” key on startup, and you’ll get a choice of which disk to boot from: either OS X or Windows.
I run Windows XP on my MacBook using both VMWare and Boot Camp, and under Boot Camp, Windows is much faster. The one drawback to Boot Camp is that I have to restart to run Windows, but I don’t need the Boot Camp way of running Windows all the time. I can also run Windows with VMWare, side by side with OS X, too.
Also see Boot Camp support at Apple: Apple – Boot Camp.