Also how to set it up so that you have some cool network features, such as being able to load the root directory using the computer's name (http://desktop/index.php), being able to edit files on other computers, and access different computers through different ports while using a domain or IP.
For people who are just getting into web development, this will help you a bundle. I've been using this setup (or similar) for at least 2 years. You can code sites on localhost, and once it works perfectly, upload it onto a host.
Unfortunately, I am forced to do this on a Vista machine, since my laptop with XP is already set up, and this computer gives me ACPI errors when I install XP.
Step 1: Configure your network card
This only work if you have a router.
Go into your control panel, Network and Sharing center. Where it says Connection, look to the far right. There should be a View Status button. Click on that.
Note down your IP address, (IPv4, if you see IPv6 too) your subnet mask, default gateway, and DNS servers.
Now press close, and in the "Local Area Connection Status" window, click on Properties.
Click on TCP/IPv4, then click on properties. Check off "Use the following IP address", and enter in all the information you just noted down.
Optionally, you can use 184.108.40.206 and 220.127.116.11 for your DNS servers. I find that they update really fast compared to other DNS servers.
This ensures your PC keeps the same local IP, and the DHCP doesn't re-assign you an IP whenever you restart.