Out of the box it is only capable of allowing all users to blog to the same page. That is, you can have as many users as you want, but their blog entries will only show up on the main page (and not on seperate blog pages).
In order to achieve your goal, you will have to do some custom editing of the scripts. The forums have some tutorials and scripts which might allow you to do that.
You can have multiple databases (or just different prefixes within one database) and multiple folders for more than one user, to get a new blog for each person.
Support for multiple blogs in the same installation might happen one day, but don’t hold your breath. In the short term, try MT or possibly b2evo.
I have just installed near of 120 wordpress with independient installation each one, take a look i.e. http://www.d-sur.net/cguilleminot/
I give each WP its own database, but all of them use the same mysql_user. OK this scheme is more difficult to administer but is more performant that one database with many and meny tables.
Additionally I searched for a tool to arrange and give statistics of each weblog. I try with
HPE, the Headline Portal Engine
http://freshmeat.net/projects/hpe/
without success and
Zfeeder
http://freshmeat.net/projects/zfeeder/
but is not the tool that I wish.
