The basic idea behind setting up a lab is to have one or more target machines you are going to crack and one or more attack platforms to do the hacking from. If you've only got on computer consider something like VMware for your targets. The beauty of VMware is that you can create an image, break it, restore it easily.
For your attack node try using a bootable Linux distro designed for pen testing such as Backtrack. This has most of the tools you'll ever want and saves you a lot of hard work.