Almost any peice of Virtualization software will enable you to configure various types of networking.
VMware for example offers the following network types:
- Bridged - machine appears as a host on the physical lan (not what you want)
- NAT - shares your PC's IP (if you want to permit your application to access the physical LAN/internet)
- Host-only - private network only visible to the VMs and your PC. If you want to permit internet/LAN access you'll need to run additional software on the host PC.
- Custom - if you need to run multiple virtual networks to test things like firewall/webserver/vpn combo configurations and the like
In terms of simplicity and least configuration, VMWare Workstation is probably the ideal choice. It's very easy to use and setup is a breeze. Licensing costs are very reasonable ($190 for a single license, or $900 for 5 licenses) and then to cover yourself for licensing I'd suggest a Microsoft Technet subscription for each team member (Tho if they're all developers and you have MSDN then you're already covered)
There are cheaper alternatives that I'd recommend for hobby use, but if you're in a commercial environment where time is money then VMware will pay for itself in productivity gains very, very quickly.
Lastly, if cost is an issue then you might be able to get away with a single VMware license for configuring the machines and then using the free VMware player to run them, however I'm not sure if it has all the same sandboxed networking features present in VMware Workstation.