If both the systems are on Win-XP (assuming SP3) then it pretty simple. Just run the "Setup a home or small office network" in the network connection menu in the control panel. Hit next, when u reach "Select a connection" click the radio button for "other" and hit next again. assuming both the comps are connecting directly through a lan wire and not through any hub, click on the last radio button. Provide the necessary details in consecutive tabs. N in the last tab, select the radio button "Turn on file and printer sharing". Click finish and restart both the systems.
If you have any antivirus or firewall installed be sure to add your friend ip in the exclusion list. These are mostly culprit while connecting between two pc's.