Question: What is Modal Window?
Answer: A modal window is any type of window that is a child (secondary window) to a parent window and usurps the parent's control. It is commonly associated with an Internet Web site pop-up window that stays in front of the original window.  A user may not press any controls or enter any information on the parent window (the original window which opened the modal) until the modal has been closed. A modal window is commonly used when the author wants to retain the user's focus on the information in the modal as it is impossible for the user to interact with the other windows of the same process.
Reference: http://www.webopedia.com/TERM/M/modal_window.html
Read More on Modal Window: http://en.wikipedia.org/wiki/Modal_window

Out of the box Joomla! 1.5 has modal popup window also known as squeeze box. Most of the time it's not activated in this tutorial I will provide simple instructions to activate modal window in your Joomla portal.

Step 1: Using your Joomla administrator; Go to Extension > Template Manager
Step 2: Edit your default template
Step 3: Before DOCTYPE HTML tag; insert following line:
<?php JHTML::_( 'behavior.modal' ); ?>
Step 4: Now if you would like an image to pop-up in modal window in your Joomla article insert following line in your article:
<a class="modal" href="images/stories/demo.jpg"><img src="images/stories/demothumbnail.jpg" border="0" alt="Modal Window Demo by JoomClan" /></a>

Demo:
We have implemented modal windows in our latest versions of movie modules; have a look at the following link:
http://joomclan.com/jcmodules2/