Configure RAID levels on PowerEdge rack servers by pressing Ctrl+R and F2 to access the utility. Select "Create New VD" then the desired RAID level based on the number of drives - RAID-1 for two drives to mirror data. Initialize using "Fast Init" then exit and reboot to complete the configuration. Multiple virtual disks can be created for different RAID levels like RAID-5 by repeating the process and designating one disk as a hot spare for fault tolerance.