Use existing Win7 OS as image file

Just installed Parallels 6 Workstation and it is wanting me to install another OS to virtualize (either a disk or an image). I just want a sandbox version of the existing OS to play with for now. Is it possible to use my existing Win7 OS and create a copy of it - rather than use another copy of Win and thus another license key.
If so where would I learn about this option and how to do it or
can I make an image of my existing OS and how would I create one that would work with parallels
thanks

Brian

 

On the product page (http://www.parallels.com/products/workstation/) it says that this can be done, under Top Features:

I haven't tried it myself though. I am also unsure regarding Windows licensing, if you keep your physical Windows install you may not be able to activate the virtual machine.