1. Insert the CD for the OS into the CD-ROM of your system.
2. Start up the new virtual machine created in the previous step(or any existing virtual machine). It boots from the CD, and then you can follow the installation instructions of the operating system vendor.

It is as simple as that!

Be sure to install VMWare Tools at the end of the install. It helps in better mouse and monitor performance(and also does other things, see help in VMWare for exact details).

To install VMTools for a virtual machine, start up the machine and wait for the
guest OS to boot up. After that, go to File->Install VMTools, and follow the
instructions that follow(the next..next..finish kind).

Installing Red Hat Linux 9.0(some quirks and how to fix them)
Insert the CD into the drive, start up the virtual machine, and follow the instructions to install Red Hat Linux 9.0. When you boot up the new virtual machine, Linux fails to detect eth0 interface(If it does not, you are fine). If it does, do this to solve the problem:
Go to /etc/sysconfig/network-scripts/ directory and change the ifcfg-eth0 script so that check_link_down() always returns a 1.

Everything should be fine now. Don’t forget to install VMWare Tools after the OS install is complete.