You create a Primary partition on your hard drive and use the remainder of the drive space as an Extended partition.
Within the extended partition, you create Logical Drives, and it is these drives that appear as more drive letters in Windows.
How you do it depends upon whether you are partitioning a new drive, or want to modify an existing one.
Further, in Windows XP, you have the choice of two different File systems; FAT 32 or NTFS. Both have Pro's and Con's and it depends upon what you want to do with your machine as to which would be beneficial for you.