To clarify, in XP there are a number of things that need to be in place before you can share files over a network SECURELY.
1) XP Pro - to be able to implement NTFS file security on a per-user basis
2) NTFS - to be able to assign individual users access rights to files & directories
3) File and printer sharing to be enabled - to create Shares
4) network connection configured
Assuming that the network is in place, and one computer can see another, and Shares have been created, then anyone can see the contents of the share.
UNLESS you configure user-level access rights using Security - that means that files can only be viewed by those providing a valid username and password - EVEN if the Share itself is setup to allow All Users full access.
Distinguish between Sharing and Security - put simply, Shares define What can be seen over the network, while Security defines Who can access them. Yes, it is not quite as simple as that, but it is not too far off the mark.
Of course it is possible to have Share-level access control only (this is a key difference between XP Home and XP Pro), and you can only have this with FAT 32, as it doesn't support file security.
There's lots of good info about this in the XP help and the MS website.
I hope that has helped, not muddied the water!
SD