What are the best options for installing a version of linux on my windows(vista) laptop?
Do I install a VM and which one?
or Do I install linux as 2nd OS boot option?
This truly depends on what you want to do. The easiest would be VirtualBox with Linux inside a Virtual Machine if your machine has the specifications to handle it. If you are just going to play then it would be perfect.
If you have a low specification machine or planning serious work then installing it as a second OS is a better option. Personally I am not have fun of dual boot because you end up spending more time in one OS then the other.
A vm is an excellent idea, you may also be interested in Cooperative Linux.
Cooperative Linux is the first working free and open source method for optimally running Linux on Microsoft Windows natively. More generally, Cooperative Linux (short-named coLinux) is a port of the Linux kernel that allows it to run cooperatively alongside another operating system on a single machine. For instance, it allows one to freely run Linux on Windows 2000/XP/Vista/7, without using a commercial PC virtualization software such as VMware, in a way which is much more optimal than using any general purpose PC virtualization software.
Depends on your need. If you need to work on Both windows and linux simultaneously then VM.. and if you want to use then dedicatedly, then dual boot. But know it, using an OS inside VM, cuts off the performance as it shares system resources.
Apart from running in a VM (a good choice, and you can download pre-installed VMs from VMware's Appliance site so you only need to unzip and load it in the free VMware Player), you could try Wubi which is a little installer that installs Ubuntu into a dedicated file or disk partition and allows you to boot into it so you have a dual-boot system.
As an alternative, try a LiveCD - a bootable CD or USB image that contains the Linux OS. There are versions of this available for all major Linux distros. This is possibly the best option is you want to experiment or tryout Linux.