Computers running Windows on a network must be part of a workgroup or a domain (Computers running Windows on home networks can also be part of a home group, but it's not required).
If you are planning to connect two or more computers on a workgroup. You must have an account on that computer (if you have a same user name and password on both computer, things will be much better).
Please note that, by default, windows XP machine will be a part of a workgroup “Workgroup” or “MSHOME”
Follow these steps to configure a different Workgroup name and if you are going to connect two or more PCs using a work group.
Open the System icon in the Control Panel. (Or) Choose Start→Control Panel→System. The System Properties dialog box appears. You can also right click on My Computer and choose properties, and there drop down to Computer Name, Domain and Workgroup settings and choose “Change Settings”.
Click the Change Settings link located in the Computer Name, Domain and Workgroup Settings area.
Click the Continue button if you’re prompted with a User Account Control security warning.
Click the Change button.
The Computer Name/Domain Changes dialog box appears.
In the Member Of area, select the option labelled Workgroup and type the name of the workgroup.
Either enter the name of an existing workgroup or create a new name for your workgroup here. The workgroup name should be short, with no spaces.
Click OK three times to close windows.
You want to close the Computer Name Changes dialog box, the welcome message, and the restart message.
Click the Close button to dismiss the System Properties dialog box. You can also close the Control Panel window, if you want.
To view all computers belonging to the workgroup, open the Network window.
Domains, workgroups, and homegroups represent different methods for organizing computers in networks. The main difference among them is how the computers and other resources on the networks are managed.