You can use XP either as part of a peer to peer network or connect to a domain. With XP Home edition, you can have up to 5 clients on a peer to peer network, but you can't use XP Home edition to join a domain. With XP Pro, you can have 10 connections on a peer to peer network and you can join a Windows 2000 server or Windows 2003 Server domain.
You can set up user accounts on peer to peer networks and assign different users different permissions, share files and printers, and an internet connection.