Yes This is a common Project management interview Question asked to every project manager.
Generally project manager use Basecamp http://www.basecamphq.com/. Another software is http://www.activecollab.com/. This is can be installed on your own server.
These tools provide ability to set up unlimited numbers of projects, assign members to the projects, set tasks, set milestones, add pages, add tickets, upload documents to the project, have discussions within the project and set numerous access levels for management, staff and clients.