There is a known incomptability between VNC and a special feature of 
the newest Windows flavors (eg, WinXP or Win2003 server) known as 
"Terminal Services" (aka, TS). At a high-level, here's what's going on: 
VNC can only remote a Windows console session when the session is 
"Active". And the console session in a TS-enabled Windows platform is 
treated rather like a Terminal Services Client that by default is 
connected to the special "session zero" -- session zero is where all 
services run, so it's the one that the VNC service remotes. If you 
"disconnect" this "session zero" somehow, say by using fast user 
switching or Remote Desktop, then it becomes unavailable via VNC. 

This doesn't mean you absolutely cannot run Remote Desktop and VNC at
the same time; some VNC users have reported that it works in their
environment just fine. As long as your use of Windows' Terminal Services
doesn't disconnect "session zero", VNC will work. The problem with this
guideline is that there is no good way to insure how Terminal Services
treats "session zero" every time for every user.

If you're having trouble connecting to a VNC Server running on Windows
XP or 2003, try one (or more) of the suggestions here:
Why won't VNC work on my new WindowsXP machine?

Thanks to "Wez" at RealVNC for the explanation!