Fortunately for you, it isn't necessary either... it is possible to install Ubuntu from within Windows and experience it as a dual-boot without any partitioning. If you don't like it, you can simply go to Add/Remove programs and uninstall it (like any other Windows application).
Q. Does it run Ubuntu within windows?
No, only the WUBI installer/uninstaller runs within windows. Ubuntu runs as a proper dual-boot. This means it has full access to all your system resources and can run on as little as 256MB RAM (although I'd say a minimum of 512MB is probably a good idea).
Q. Is it slower than Ubuntu?
Yes, but not noticeably so. It's a lot faster (and simpler) than running Ubuntu in a virtual machine under Windows.
Q. How does it work?
In simple terms, WUBI creates a virtual disk that is simply a large file under the Windows file system. It then runs the standard Ubuntu installer, but instructs it to install to the virtual disk. This avoids the need for creating a separate partition.
It also adds a special form of the Grub bootloader into the Windows boot manager, which allows you to select either Windows or Ubuntu when you start up the machine.
Q. What's the down side?
WUBI is mostly used by newcomers to Ubuntu. That means it doesn't get as thorough testing coverage or support as regular installs. Many Ubuntu community members are dead-set against WUBI and can be very unhelpful e.g. you regularly see advice to uninstall as soon as you ask for help, which makes them feel better but doesn't address any of the issues.
I'll address the sorts of problems that are WUBI-specific in other posts, but what you need to know is that once a WUBI install is booting (once you are past the GRUB menu), any issue you see is likely an issue between Ubuntu and your hardware and is unrelated to WUBI.
Q. How do I safeguard my WUBI install
Do not ever install the Grub bootloader to any devices. Grub updates have a very misleading interface and although you need it for WUBI, you do not need to install it's bootloader yourself ever. When you see a screen popup for you to select where to install it, leave all boxes unchecked.
Try and avoid hard shutdowns on your computer. Since WUBI places the entire Ubuntu install on a virtual disk (a single file) it can corrupt if a write is pending and the computer is turned off. If something hangs, then try anything and everything to regain control. The last resort is the following: hold down Alt+SysReq and then slowly press the following keys R-S-U-B.
As for all computer use, backup your data. If you want to be cautious you can back up the entire virtual disk C:\ubuntu\disks\root.disk (change drive letter if required).
Read the release notes before trying to upgrade to a new Ubuntu release. Take special precautions to backup all c:\wubi* files and the c:\ubuntu directory before upgrading.