An article on ZD Net Asia gives advice on creating a simple, simulated network with the honeyd tool. Honeyd is a tool that can be used to simulate an entire network of vulnerable computers. The standard use for honeyd is to set up a honeypot network but can be used to start learning the ropes of penetration testing or simply perform some research. Using honeyd is a lot cheaper than building an entire physical test network, and a lot simpler than building a virtual network using virtual machine technology like Virtualbox, VMWare, and Xen.
“Considering the licensing issues involved if you need MS Windows hosts in your test networks, the savings can be really shockingly large. Check that number above: the developer has tested honeyd simulating as many as 65,536 honeypot hosts. Doing that with actual MS Windows licenses would cost more than three million dollars with a very generous volume discount.”