Most Linux installers these days will automatically detect Windows installs and will offer to setup a dual boot for you. WUBI is not my preference at all, but others may disagree.
Ubuntu, Sabayon and SuSE are what are known as Linux distributions. "Linux" specifically refers to the core, or "kernel," of the system; the engine in the car, as it were. By itself, the Linux kernel is about as useful and interesting as a car engine without the car. Distributions provide the rest of the car, so to speak. They are compilations of applications, background processes, daemons, themes, sounds, and all other aspects of an operating system. These compilations are put together and maintained by groups of people who happen to like their way of doing things. Sometimes it comes down to little more than some people prefering method X of doing things and others prefering method Y. It's not unheard of for people (read: super geeks) to eschew the pre-fabricated distributions and build their own operating system from the thousands of available parts.
Finding the right distro for you is similar to finding the right brand of coffee: they're all quite alike but some appeal to your particular needs and interests more than others. In general, new users are steered towards the Ubuntu family of distros. Ubuntu and it's siblings (Kubuntu, Xubuntu, Edubuntu, and Ubuntu-Studio) make a concerted effort to provide a Linux operating system which anyone can use; "Linux for human beings" is their motto. Any of the Ubuntu family would make an excellent starter Linux for new users. (That isn't to say that Ubuntu&Co. are less powerful/not as good/dumbed down versions of other distros, of course.)
As Romeo said, you can use WINE to run a large number of Windows applications, including a number of games. It's not perfect, however, but you can check on the WINE AppDB
for other people's experiences with an application to get a sense of what to expect. Of course, there are tens of thousands of Linux-native applications available, from office suites to online 3D first person shooters (Alien Arena, baby!)