But what if you didn't create two partitions on your disk originally? How can you shrink the existing partition without losing any of the data, and create a second partition?
It turns out that shrinking an existing partition without losing all the data on it is not supported by MacOS. There is a commercial product at http://www.fwb.com/html/partition_toolkit.html. That's only for MacOS 9. Nothing I know of does this on MacOS X yet.
Note carefully that all of these start with "back up the data on the partition that you want to split"!
The other disk to boot from can be a freestanding firewire drive or almost any Mac with a firewire drive. Just boot it while holding down "T", and all of its volumes will be exported over firewire as if it was a big firewire drive enclosure). You can't do this with black and white G3's as they don't support the TDM feature of firewire.
or
Run NetInstaller app and set machine to net install.
Once in installer switch to Disk Utility, repartition and install.
Reboot in your new OS and clone onto your new partition