I'm not entirely sure if Virtual PC support Linux, I think it does but badly. I'd also have a look at VmWare Server (which has recently released a free version).
Back to your question: Most popular versions of Linux on here are: Ubuntu, SuSE and Gentoo. I recommend Ubuntu or SuSE if you haven't used Linux before. When using VMWare, I've always burned the isos to CDs and then got Vmware to boot from CD (but I think you can get round this someway - but I always did this because I like a hard copy). Then it's just a case of following the install instructions.