Three points:
1. Windows XP is not a server operating system and does not have the
management features of a server operating system. However, you can create
a peer-to-peer (workgroup) network and share files across it. If you want
to think of one of the computers on the network as a "server," that's
fine, as long as you realize that it's not a real server with server
features.
2. *Some* applications will run across the network, but not applications
will.
3. One of the other differences between Windows XP and a real server is
that Windows XP Professional restricts the number of number of
simultaneous connections you can have to ten (only five in XP Home).
That's ten connections, not ten computers, so the number of computers is
usually somewhat less.