Sandboxie does what virtual machines such as VMware Player, Virtual Box and Microsoft Virtual Pc do with the difference that it works on the application level and not the operating system one. Instead of running a virtual operating system that makes it safe to try and test software it lets you run software in a sandbox on your current operating system with the same result. The normal process in an operating system is that applications can read and write date from the system.
Sandboxie steps between the application and the system and allows only reads from the system itself but no writes. Writes are only allowed in the sandbox. This is great if you want to run applications without having to worry about system safety at all. It is still a good idea to be careful as usually when working with Sandboxie. If something bad slips through it is intercepted by Sandboxie.
It is a good idea to run applications that are used to attack computers with malware, spyware and viruses inside the sandbox to avoid that they reach your operating system. What can I say, it is a nice uncomplicated way to add an additional level of security to your system.
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http://bitebyte.wordpress.com/2007/04/22/go-virtual/
I thinnk that sendboxie are diferent from VMWare.
After I translated this article, a Chinese reader left a comment that says Sendboxie is similar a Chinese sofware which called Powershadow. You can use it to test new software, maybe shareware without registered.
Powershadow:
http://powershadowsecurity.com/default.aspx