You must activate ICS (Internet Connection Sharing) on the Local Area Connection that connects to the internet, if you haven't already. Open 'Network and Sharing Centre', left click on the connection, likely 'Local Area Connection', and then select 'Properties'. Now click on the 'Sharing' tab at the top and tick the top box. Some services are required for ICS to work, like Windows Firewall amongst others, but it should work just fine. A reboot of both PCs may be needed to enable internet connectivity on the XP machine.
Hope this helps