Wubi Internals
How does Wubi work?
Wubi adds an entry to the Windows boot menu which allows you to run Linux. Ubuntu is installed within a file in the windows file system (c:wubidiskssystem.virtual.disk), this file is seen by Linux as a real hard disk.
Is this running Ubuntu within a virtual environment or something similar?
No. This is a real installation, the only difference is that Ubuntu is installed within a file as opposed to being installed within its own partition. Thus we spare you the trouble to create a free partition for Ubuntu. And we spare you the trouble to have to burn a CD-Rom.