There are format-changing programs available free on the web. as well as programs specifically for making eg ipod compatibility etc.
However, you can do it in Windows Movie Maker, which is included in XP. Import your video, edit it if required, and then play around with the 'finish movie' options. In the save to my computer option, having named the file, there are many size and quality settings avaialble (under show more choices). There is even a send-as-email option which produces a wmv file.