Go to Sites > Manage Sites > click your site > Edit > Servers > Click the + > Set up a second server, it will automatically be labeled as Testing.
You then click the Expand button in your Files window and you'll see a couple buttons in the middle of the toolbar, one that looks like a bulleted list and one that's 3 bullets with a lightning bolt. Those are Remote Server and Testing Server. Which ever is clicked is the one you're uploading to.
EDIT: Personally, I just put my local root folder into the htdocs folder of a testing server installed on my Dev machine and run localhost/mysitename for testing.