I'm not techie, but I've done this, and I'm a little confused.

Consider this:

You have Red Hat Linux installed on a ext3 filesystem. Two people use this system - Steve and Dave. They each have a "normal" (non-root) account. Both cannot access each other's documents. However, if a person does a "pseudo" install on the system, he will supply a new root password and then he can access both Steve and Dave's documents without restriction.

On the other hand, if a new install is done on a computer running XP on an NTFS file system, overwriting the previous Windows installation, then the individual "My Documents" folders of all "Administrators" of the system will become "useless". Everyone is denied access to these folders, and the only way to delete them is to reformat the hard drive.

Any opinions? Does this mean the Tux cannot protect our documents, and Linux is vulnerable to "Pseudo install" attacks?

This isn't a "vulnerability" or some sort of attack, but rather the simple fact that if someone has physical access to your computer, you have no security. They could boot a CD-based distro like Knoppix, or simply boot into single user mode. With some distros, booting into single user mode automatically gives you root access. Security can only go so far, and physical access means a reasonably skilled person can defeat a number of normal security measures.

That is the simple truth.
You could disallow booting from floppy or CD and password protect your BIOS if you wanted to live in denial.

Not really sure what you mean by a pseudo install, but virtually all major OS's suffer from the local attacks Hangdog42 described, so it's definitely not a "Linux" thing. It's an unfortunately consequence of people forgetting root/admin passwords...if there's no way to reset it, then the user now has very expensive doorstop.

If you want to keep your files secure, encrypt them. Even then, it's often still possible to recover the data by recovering encryption keys from drives or if it's not stored on disk, they can even turn up in the swap partition.

Even the solutions that 2damncommon listed are defeatable.