In Windows XP: Go to Network Connections Control Panel, right-click Local Area Network connection and select Properties. Now select Internet Protocol(TCP/IP) and click Properties.
Now once you are inside the TCP/IP properties of your computer, click Use the following IP and enter 192.168.0.1 as IP address and 255.255.255.0 as subnet mask. Leave the other details blank and click OK.
Now go to TCP/IP properties of the second computer and enter the same details except the IP address, which should be 192.168.0.2 and click OK.
Now the networks are ready, you might need to restart both computers in some cases. If you are looking to share the Internet Connection between two computers, go to Local Area Network properties again and click on Sharing tab. Here you can select the enable internet connection sharing.
To share files and folders between the two computers, go to the properties of that file/folder and select Sharing tab. Click Share to being sharing it on the network.
Let me know if this works for you. Enjoy!