It's simple, just try it.
Go start a large download, then switch users.
The download will continue to completion, while user 2 is gaming or whatever.
It is in fact application dependent.
Heck Microsoft even documents it on MSDN:
Platform SDK: Policies and Profiles
Fast User Switching
When you log onto a computer running Windows 2000, the system loads your user profile. Because each user has a unique user account, it is easy for multiple users to share a computer. When you log on, the desktop settings, files, favorites, and history you see are yours; they cannot be accessed by other users. When you log off, your profile is preserved for the next time you log on. After you log off, another user can log on.
In Windows XP, you do not have to log off to allow another user to log on. Instead, it is possible for multiple users to log on and switch quickly between their open accounts. This feature is referred to as fast user switching. Switching to another account does not change the state of the applications that you are currently running. Suppose that you allow another user to switch to his account while you are logged on. When you switch back to your account, your applications are running and your network connections are preserved. Therefore, it appears that you and the other user are simultaneously using the computer.
If your applications comply with the Windows 2000 logo requirements, they should work with fast user switching on Windows XP. However, it is important to keep this scenario in mind when developing an application so that it behaves as users would expect. Use the following guidelines when writing your applications.
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