# create mount folder:

mkdir /tmp/my10mbvirtualdisk

# create file system (filename=filesyst in current folder) (10Mb):

dd if=/dev/zero of=./filesyst bs=10485760 count=1
sudo losetup /dev/loop0 ./filesyst
sudo mkfs.ext3 /dev/loop0

sudo mount /dev/loop0 /tmp/my10mbvirtualdisk


# now you can use /tmp/my10mbvirtualdisk as disk



# destroy:

sudo umount /tmp/my10mbvirtualdisk
sudo losetup -d /dev/loop0
sudo rm ./filesyst