By separate devices I believe he means 2 mouse cursors. You've been able to use multiple input devices for a good while in Windows. However there isn't any software (that I'm aware of) that will allow each device to have its input focused as if it was it's own computer. I vaguely remember (late 90s) such a device that claimed to do this however it wasn't something I would have recommended.
Two mice can control one cursor, which is how Windows works today and why you could screw with your friend's head.
The problem regarding the OP's desire is that Windows by itself cannot maintain focus to more than one app at a time. The window/app that has focus is where all mouse clicks and keyboard keystrokes are sent unless you have specific software/hardware set up to route those differently. I'm presuming it would also require some hefty modifications to the Windows GUI as well, as there are video rendering (DirectX) complications when that window does not have focus (see the "Audio in background" option in WoW, for example). The fact that there are so few reliable multiboxing applications (which work around a lot of these issues) is further evidence of the complexity of this type of use case.
Now playing: WoW (Garona)
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