You need to connect the two computers with a *CROSSOVER* ethernet cable. Then enable "Internet Connection Sharing" on the actual internet connection (modem connection) in the 'Host' PC.
When you enable ICS, Windows will configure the network adapter used to connect to the 'Client' PC with the IP address 192.168.0.1 and Subnet Mask 255.255.255.0
The 'Client' PC's network adapter should be set to get its IP address automatically, which it does by DHCP from the 'Host' PC.
If you are using the Zone Alarm firewall in the 'Host' PC, the Internet Zone Security level needs to be reduced to Medium, otherwise ICS traffic will be blocked.