This is a concept that many people have difficulty in understanding, so forgive the long winded explanation.
The easiest way (I think) to understand what you are trying to achieve, is to think of the Hard Drive as a Filing Cabinet. Now that filing cabinet may be small and have just one or two draws, or perhaps larger and have four or six and if we take it to the extreme as many as you like!
When you partition a drive, you are creating the draws of the filing cabinet. How many draws you want, will be your choice and will depend upon the use to which it is to be put.
The first draw, the primary partition, will always be your C: drive, and is normally the "Active Drive" - more about that in a moment. Any other partitions you create, will be sequentially lettered, D;, E: and so on.
Windows, of all flavors, is prone to crashing from time to time, and if it's a major crash, you may end up reinstalling your operating system, so what's this got to do with partitioning?
If you choose to partition a drive and keep all your personal files on a drive OTHER than the operating system drive (normally C:), if you need to reformat the drive (which effectively wipes it clean) you will not loose any personal data. It will remain safe on D:, E: or wherever you placed it.
To recap, you have a fire in the top draw (C: partition) and everything is destroyed, but the draw below, D: is unharmed, and all your personal possessions are intact. This is the real benefit of partitions.
I mentioned earlier, C: is normally the active partition. This means that it is the partition that is looked for during the boot sequence. There are a number of actions that take place during boot-up, and you need an active partition in order for this to happen. The primary reason is, the active partition holds the Master Boot Record (MBR) and it is this essential data that is used to initiate the whole operating system start sequence.
How you partition, will depend upon whether you are dealing with a new or empty drive, or whether you have data on the drive you wish to keep.
If the former, click here for a tutorial on how it is done, but when loading XP from scratch, it can also be done within XP's setup sequence.
If the later, you will need to use third party software such as Partition Magic, which will change drive partitions for you, without loss of data. A word of warning here. Products such as Partition Magic rarely give a problem, but always BACKUP essential data. Although extremely reliable, there's always a first time, and something like a power failure in the middle of a resize could completely destroy your objective and it is something you have no control over, unless you are one of the rare people to have an Uninterruptable Power Supply (UPS).
Please post back if you have further questions on this important subject.