You do not have to create a virtual directory, you can create an entire new site in IIS. From IIS manager, right click the sites folder listed under your server (IIS 7 or higher. Also available in IIS6 but views/click locations are different). Then select New Website. This brings up the following window in which you can specify the location for the website content, host header information (what domain name to respond to), port information (eg 80), app pool, etc.
By doing this, you can host multiple domains on a single IIS server. Note that if they are all sharing port 80, you have to specify a host name so that IIS knows how to handle multiple sites on a single port. If you do not specify a host name, only one of the websites will be active, the rest will be in a stop state.