Hi Anjanesh,
Yes, to serve the JSPs you need to have a servlet container like Tomcat.
You can run any number of servers on you machine, provided they use different port numbers(IIS + Apache + Tomcat in your case).
To your question about which application server to use. Well, the choices are plenty if you are happy to buy the license products.
If you want to try out something for free & based on open source, then Tomcat is the favorite. If you plan to use EJBs in near future then go for
JBoss(JBoss is the EJB container and comes with Tomcat embedded in it).
I have been using Tomcat for a long time in production environment with satisfactory results. Tomcat is relatively sluggish in performance, however you can load balance by using multiple instances of it. The new version 5.5.7 is claimed to be better so give it a try. (But Remember, Tomcat 5.5.7 is designed for the new JVM 1.5 so, if u r using the old JDK then either download the Tomcat compatibilty patch or choose a prior version of Tomcat)
Overall Tomcat is a good product. So go ahead with confidence...
Good Luck!
Rahul..