Sure you can.
You can also let "setup" automagically re-partition the install on your (formerly) "c:" drive and dual-boot multiple OS's from a single disk.
But if you repartition, there's always the risk of losing everything.
And if you run from an external drive, it might be a slow USB drive. And you'd run the risk of poor performance reflecting badly on your trial distro.
Try downloading and playing with some "Live CDs". That way, you can experiment with different versions, without having to install ANYthing.
Try experimenting with virtual machines (e.g. Xen, VBox or - my favorite - VMWare). You can set up an entire virtual lab inside of your one PC!
'Hope that helps .. PSM