Let’s say i have a reasonable hardware and want to create an n number of virtual machines inside eachother for no particular reason but to experiment, i have a few questions:
What would be the best way to approach the problem?
What are weird problems that i would encounter?
After how many levels would my computer become unusable?
Would the loss of performance from a level to another be linear or exponential?
What’s the deepest level of nesting reached?


Would entirely depend on what your starting hardware is like.
My 8 core desktop with 32GB of ram would do less then the HP DL380 with 24 cores and 192GB of ram.
It would also depend which hypervisor you use. Microsoft Hyper-V would likely run worse then ESXi or qemu.
How would I approach this? Start with something like damn small Linux or Alpine Linux to start with the smallest footprint. Install qemu and allocate everything to the VM. Rinse and repeat untill I get an out of resources error.