If you are using multiple monitors, usually you have several applications open at once. Virtual desktop managers make it easier to work with lots of applications.

Think of each desktop as a distinct work environment. The taskbar shows only the applications open on the current desktop, which greatly reduces clutter. Take a look at my web development setup:

• Web design desktop: Windows Explorer on monitor 3, UltraEdit on monitor 1, MSDN Library on monitor 2.
  
• Web preview desktop: Navigator on monitor 3, Internet Explorer on monitor 1, Opera on monitor 2.
  

I used the Silicon Realms MultiDesk software, the two buttons next to the Start button are used to switch between desktops.

Most virtual desktop managers also let you move applications between desktops. With MultiDesk, simply grab the application and move it to the desktop of choice. Drop the application at the bottom of the window to place it on a new desktop.

I tested 10 different virtual desktop managers. All tests were done on a dual PII-400 with 3 monitors, using Windows 2000 final.
Important: most applications have problems with toolbars on secondary monitors: on the first desktop, everything works fine. But on all other desktops, the toolbar is not visible. It still occupies screen space though, a maximized window on the monitor with the invisible toolbar doesn't extend to the bottom of the screen... If you manually add the toolbar and move it to a secondary monitor, it simply vanishes (and gets added to the same toolbar on the first desktop). MultiDesk, Cool Desk and goScreen are the only tested applications that support toolbars on secondary monitors. As you can see in the screen shots above, I'm using the Quick Launch toolbar on my second monitor, works fine on both desktops with MultiDesk.

My Favorite

My personal favorite is clearly MultiDesk. It supports toolbars on secondary monitors, has a nice user interface that doesn't take up much screen space, and switching between desktops is fast. Tips: you can disable the annoying flashing of the desktop buttons on the Options dialog. Removing an empty, named desktop: simply delete the name, after the next switch it will be removed automatically. Shareware, US$ 25.

Other multimon-compatible

Cool Desk
supports toolbars on secondary monitors, fast switching between desktops. I didn't like the user interface, a floating window that always seems to be in the way as it can't be docked on the taskbar, and it is also limited to the primary monitor. Shareware, US$ 12.95.

goScreen
supports toolbars on secondary monitors. Same floating window interface as Cool Desk. Shareware, US$ 20.

DesktopPlus
doesn't support toolbars on secondary monitors, the user interface takes up too much space. Otherwise it works fine. Shareware, US$ 20.

XDESK
doesn't support toolbars on secondary monitors. You switch between desktops using icons on the system tray, nice and lean user interface. Loads of options. Shareware, US$ 30.

Desks At Will
doesn't support toolbars on secondary monitors, one icon too much on the system tray. Nicely done otherwise. Shareware, US$ 22.50.

Large Desktop
doesn't support toolbars on secondary monitors, and also an unneeded icon on the system tray. Maybe it's just me, but I just hate a cluttered system tray... Shareware, US$ 10 (can't be purchased online).

Not multimon-compatible

For even more virtual desktop managers, see download.com.