It's easy. Windows XP supports multiple monitors natively. You just go to Display Properties->Settings and it shows you all display devices plugged into your computer. You click the monitor you want to be your main monitor and click the checkbox that says "Use this device as the primary monitor." Click another monitor and click the checkbox that says "Extend my Windows desktop onto this monitor."
You don't need to buy any software. I run three monitors side by side at work, one keyboard, one mouse. It's like one big wide desktop.
You do need to have multiple video outputs on the back of your computer. Some possible configurations:
1) onboard video + separate PCI or PCI-e video card.
2) 2 or more separate video cards
3) one video card with multiple VGA or DVI outs that supports multiple monitor -- not all of them do, even when they have multiple outs
There's also a freeware app to extend the Windows taskbar onto the other monitor... Windows doesn't handle that by itself