Go to your gamedir, and edit sun.ini. Find these lines:
[Video]
ScreenWidth=xxxx
ScreenHeight=xxx
StretchMovies=no
Edit the values of ScreenWidth and ScreenHeight to set your resolution. I strongly recommend setting StretchMovies to yes. Note that the game uses 16 bit color, and if your system can handle a specific resolution at 32 bit color but not 16 bit color, it will not run at that resolution.
The game's FOV is directly proportional to your resolution. The more pixels in your resolution, the more territory you can see at once. For example, 1280x800 will appear to be wider and a little bit taller than 1024x768, but 1280x1024 will appear equally wide as 1280x800 and taller.
Widescreen in multiplayer works as described above. However, many hosts enforce resolution limits. If you try to join a game with a resolution limit, you will be forced to play the game at a non-widescreen resolution (usually 640x480). If you host a game and are using a widescreen resolution, you will not have the option of enforcing a resolution limit.