Probably the biggest catch with XP SP2's built in Windows Firewall, and one of the things that makes it considered one of the weakest available options, is that it only does ingress filtering. What that means is that it will block stuff trying to come into your machine, but it won't block stuff trying to leave your machine. So, if you get some sort of spyware or worm that isn't picked up by your AV, and it decides to make an outbound connection to some machine in China or whatever, you'll never see it.
With some of the other solutions mentioned here, they do egress filtering, so you'll get an alert saying that some unknown app is trying to make an outbound connection, even if your AV doesn't know anything about it.
With some of the other solutions mentioned here, they do egress filtering, so you'll get an alert saying that some unknown app is trying to make an outbound connection, even if your AV doesn't know anything about it.