Quoting from the wikipedia, "Virtual Private Servers (VPS) or virtual dedicated servers are a form of virtualization that divide a single physical server into multiple virtual servers. The practice of partitioning a single server so that it appears as multiple servers has long been common practice in mainframe computers, but has seen a resurgence lately with the development of software and technologies such as VMware, and user-mode Linux."
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VPS configurations are very popular in the web hosting world. One of the best-known Linux VPSs is "UML" -- User Mode Linux. Linux kernels newer than 2.6.0 have support for UML built in. RHEL 4 is based on Linux 2.6.9, so that is your best choice.
The UML community site has information on installing and running UML. It is pretty straightforward - you install UML, configure a filesystem for it and then run UML "booting" from that filesystem. And of course, you can have as many virtual Lnuxes running on your host as you have file space and CPU cycles for.
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