http://www.x.org/wiki/Development/Documentation/Multiseat/
And if you're on arch linux this is a good start:
If I remember correctly, I had to bump the computer up to 6GB of RAM. She was running off the motherboard's built-in video card and I had two monitors on a separate card.
Eventually Ubuntu changed things so that it wouldn't work anymore, but I believe that it's possible to do now. If you have kids this would be a cheap way to give them all a decent amount of computing power.