Download Docker Desktop and follow the installation instructions.

Once installed, start Docker Desktop from the Windows Start menu, then select the Docker icon from the hidden icons menu of your taskbar. Right-click the icon to display the Docker commands menu and select "Settings".

Ensure that "Use the WSL 2 based engine" is checked in Settings > General .

Select from your installed WSL 2 distributions which you want to enable Docker integration on by going to: Settings > Resources > WSL Integration .

To confirm that Docker has been installed, open a WSL distribution (e.g. Ubuntu) and display the version and build number by entering: docker --version

Test that your installation works correctly by running a simple built-in Docker image using: docker run hello-world

Here are a few helpful Docker commands to know:

Install the VS Code WSL extension . This extension enables you to open your Linux project running on WSL in VS Code (no need to worry about pathing issues, binary compatibility, or other cross-OS challenges).

Install the VS Code Dev Containers extension . This extension enables you to open your project folder or repo inside of a container, taking advantage of Visual Studio Code's full feature set to do your development work within the container.

Install the VS Code Docker extension . This extension adds the functionality to build, manage, and deploy containerized applications from inside VS Code. (You need the Dev Containers extension to actually use the container as your dev environment.)

Let's use Docker to create a development container for an existing app project.

For this example, I'll use the source code from my Hello World tutorial for Django in the Python development environment set up docs. You can skip this step if you prefer to use your own project source code. To download my HelloWorld-Django web app from GitHub, open a WSL terminal (Ubuntu for example) and enter: git clone https://github.com/mattwojo/helloworld-django.git

Always store your code in the same file system that you're using tools in. This will result in faster file access performance. In this example, we are using a Linux distro (Ubuntu) and want to store our project files on the WSL file system \\wsl\ . Storing project files on the Windows file system would significantly slow things down when using Linux tools in WSL to access those files.

From your WSL terminal, change directories to the source code folder for this project:

cd helloworld-django
Open the project in VS Code running on the local WSL extension server by entering:
code .
Confirm that you are connected to your WSL Linux distro by checking the green remote indicator in the bottom-left corner of your VS Code instance.
From the VS Code command pallette (Ctrl + Shift + P), enter: Dev Containers: Reopen in Container as we are using a folder already opened using the WSL extension. Alternativly use Dev Containers: Open Folder in Container... to choose a WSL folder using the local \\wsl$ share (from the Windows side). See the Visual Studio Code Quick start: Open an existing folder in a container for more details. If these commands don't display as you begin to type, check to ensure that you've installed the Dev Containers extension linked above.
Select the project folder that you wish to containerize. In my case, this is \\wsl\Ubuntu-20.04\home\mattwojo\repos\helloworld-django\
A list of container definitions will appear, since there is no dev container configuration in the project folder (repo) yet. The list of container configuration definitions that appears is filtered based on your project type. For my Django project, I'll select Python 3.
A new instance of VS Code will open, begin building our new image, and once the build completed, will start our container. You will see that a new .devcontainer folder has appeared with container configuration information inside a Dockerfile and devcontainer.json file.
To confirm that your project is still connected to both WSL and within a container, open the VS Code integrated terminal (Ctrl + Shift + ~). Check the operating system by entering: uname and the Python version with: python3 --version. You can see that the uname came back as "Linux", so you are still connected to the WSL 2 engine, and Python version number will be based on the container config that may differ from the Python version installed on your WSL distribution.
To run and debug your app inside of the container using Visual Studio Code, first open the Run menu (Ctrl+Shift+D or select the tab on the far left menu bar). Then select Run and Debug to select a debug configuration and choose the configuration that best suites your project (in my example, this will be "Django"). This will create a launch.json file in the .vscode folder of your project with instructions on how to run your app.
From inside VS Code, select Run > Start debugging (or just press the F5 key). This will open a terminal inside VS Code and you should see a result saying something like: "Starting development server at http://127.0.0.1:8000/ Quit the server with CONTROL-C." Hold down the Control key and select the address displayed to open your app in your default web browser and see your project running inside of its container.
You have now successfully configured a remote development container using Docker Desktop, powered by the WSL 2 backend, that you can code in, build, run, deploy, or debug using VS Code!
Troubleshooting
WSL docker context deprecated
If you were using an  early Tech Preview of Docker for WSL, you may have a Docker context called "wsl" that is now deprecated and no longer used. You can check with the command: docker context ls. You can remove this "wsl" context to avoid errors with the command: docker context rm wsl as you want to use the default context for both Windows and WSL2.
Possible errors you might encounter with this deprecated wsl context include: docker wsl open //./pipe/docker_wsl: The system cannot find the file specified. or error during connect: Get http://%2F%2F.%2Fpipe%2Fdocker_wsl/v1.40/images/json?all=1: open //./pipe/docker_wsl: The system cannot find the file specified.
For more on this issue, see How to set up Docker within Windows System for Linux (WSL2) on Windows 10.
Trouble finding docker image storage folder
Docker creates two distro folders to store data:
\wsl$\docker-desktop
\wsl$\docker-desktop-data
You can find these folders by opening your WSL Linux distribution and entering: explorer.exe . to view the folder in Windows File Explorer. Enter: \\wsl\<distro name>\mnt\wsl replacing <distro name> with the name of your distribution (ie. Ubuntu-20.04) to see these folders.
Find more on locating docker storage locations in WSL, see this issue from the WSL repo or this StackOverflow post.
For more help with general troubleshooting issues in WSL, see the Troubleshooting doc.
Additional resources
Docker docs: Best practices for Docker Desktop with WSL 2
Feedback for Docker Desktop for Windows: File an issue
VS Code Blog: Guidelines for choosing a development environment
VS Code Blog: Using Docker in WSL 2
VS Code Blog: Using Remote Containers in WSL 2
Hanselminutes Podcast: Making Docker lovely for Developers with Simon Ferquel