You'll need to stop using simple file sharing. From any Explorer window, select Folder Options from the Tools menu, and then click the View tab. Turn off the Simple File Sharing option. Then, create users on the XP machine sharing out files, give those users appropriate passwords, and then assign rights to those users for the files and/or folders you want to secure. Once that's complete, when someone wants to retrieve a protected file, they'll be prompted to enter a valid username and password.

Turn of simple file sharing:
How to turn off simple file sharing
To disable simple file sharing, follow these steps:1. Click Start, and then click My Computer.
2. On the Tools menu, click Folder Options, and then click the View tab.
3. In the Advanced Settings section, clear the Use simple file sharing (Recommended) check box.
4. Click OK.

How to share a folder or a drive with other users
To share a folder or a drive with other users, follow these steps:1. Click Start, click My Computer, and then locate the folder or drive that you want to share.
2. Right-click the folder or drive, and then click Sharing and Security.
3. On the Sharing tab, click Share this folder.
4. To change the share name of the shared folder or drive, type a new name in the Share name box. Other users see the new name when they connect to this shared folder or drive. The actual name of the folder or drive does not change.
5. To add a comment about the shared folder or drive, type the text in the Comment box.
6. To limit the number of people who can connect to the shared folder or drive at the same time, click Allow under User limit, and then type the number of users.
7. To set share permissions on the shared folder or drive, click Permissions.

Note To share folders and drives, you must be logged on as a member of any one of the following groups:
• Administrators
• Server Operators
• Power Users

8. Click OK.

Troubleshooting (only if you have problems)
• The Sharing tab is not visible.

Use the Services snap-in to start the Server service.
To do this, follow these steps:
1. Click Start, and then click Control Panel.
2. Click Performance and Maintenance, click Administrative Tools, expand Services and Applications, and then double-click Services.
3. Right-click the Server service, and then click Start.
• The folder is already shared.

Click New Share, and then type the new share name.
• You want to hide the shared folder.

To hide the shared folder, type $ as the last character of the share name. Other users cannot see this shared folder when they search by using My Computer or Windows Explorer, but they can map to the shared folder.
• Other users occasionally cannot use your shared folder.

No more than 10 other users can connect to your computer at one time if you are using Windows XP Professional. In Windows XP Professional, the maximum user limit is 10, regardless of the number that you type in the Allow box.