Virtual desktops can help reduce desktop clutter, where you have too many windows open to keep track of them all. Each virtual desktop becomes a separate workspace, to help you organize your work tasks more effectively.
When I ran Linux at work, I used to open my email client on one virtual desktop, my web browser in another, and my OpenOffice documents in a third desktop. This was especially useful when writing a document that required referring to other Word or Excel files. I could open all the files at once, and keep them open on the same virtual desktop, making it much easier to switch between them.
Even Mac OS X supports virtual desktops natively, through Spaces. This is basically the same thing as on Linux, except you have to press a hotkey to select a different virtual desktop.
So why is it that Windows still does not have a virtual desktop manager? I'm currently running Windows 7, and this very useful feature is missing. I've been using virtual desktops under Linux since 1993/1994, and Apple has supported them since Mac OS 10.5. But Microsoft hasn't gotten there yet, I guess. It's 2010, but still no virtual desktops in Windows?