Here's a quick overview of the basics:
A LAN consists of two or more computers with network cards or NICs, the wiring to connect them, and the hardware used to connect the wiring -- a hub or a switch. Most computer stores sell starter networking kits (a hub/switch, two NICs, and drivers, but usually no cable). When you buy cable, buy "category 5" network cable, which supports speeds of up to 100 megabit/sec. Even if your internet connection doesn't go this fast, communication between PCs in your house will.
Most home networks are set up to share files with each other, or to share out an internet connection of some kind. If you only have two machines, you will need to devote one to being the "gateway" computer, the one that actually does the sharing-out of the internet connection. This one needs to be on continuously. If you don't like the idea of devoting a machine to that, you can buy a router which shares out the internet connection and simply plug all the computers into that.
Routers like this also generally include a firewall to keep outsiders from roaming your in-house network, but check with the manufacturer. If you use a computer to do the sharing, you'll need to add some sort of firewall software to your PC. Windows XP has a firewalling system built in, but it is very rudimentary and not configurable.
Buying the same brand of network card tends to reduce the problems NICs have when communicating with each other. Cheap NICs often have poorly-written firmware. Good brands include Linksys and Intel.
This was first published in May 2002