Compressing Files and Folders in Windows XP
Sooner or later, you’re going to run out of space on your hard disk. It will happen. It’s a law. Both Windows XP Home and Professional include a zip compression utility suitable for compressing files and folders
To compress a file or folder
Right–click the file or folder.
Point to Send To.

Click Compressed (zipped) Folder.

This creates a compressed folder, identified by a zipper icon, displaying the same name as the file compressed.
Compressed folders may be made from scratch. Follow these steps:

Right–click the desktop.
Point to New.
Click Compressed (zipped) Folder.
Files may be added using drag and drop or the [Send To] command.
It’s really a moot point. If you use WinZip, it’s just as easy to add the folder/file to the WinZip context menu rather than use the [Send To] command, bypassing [Compressed (zipped) Folders] totally.

- srikanth dhanwada