uh, I use something called Parallels Desktop, which is an amazing program that emulates Windows XP and Vista, among other OSes. You do need the installation disk for the OSes to start emulating it, but if you're seriously dedicated to whatever you want to do with your windows emulator, then you should be up for paying the price of the Operating System. If you're not, then why did you get a Macintosh computer in the first place?
Anyways, here's the site for Parallels Desktop:
https://www.parallels.com/
the latest version is 3.0. Although I haven't seen it in stores myself, it costs $80 on the site, plus shipping and handling. You can always pirate it to get it for free, but I read that you didn't want to, so never mind.
I have to say that you're not gonna find a very good emulator for free. You're probably gonna have to pay for it. But if you just got your iMac, then it should be loaded with Leopard. You do know that Leopard has a feature called Boot Camp, right? It's fairly simple to use, but personally I hate it. I rather use Parallels.
Also, wakachamo, you can use a single Windows Installation Disk on up to five computers legally. :x