To zip using native XP, right-click the a list of files or a folder and choose SendTo|Compressed (Zipped) Folder. It does not do a compression in place like NTFS compression does but creates a compressed copy of the original with a zip extension. The explorer icon for the item will show a zipper up the middle of the icon (cute).
Did a quick test zipping the is-it-true.org folder which is currently 75MB. Compressed the mostly text documents down to 50MB.
The zip functionality seems quite complete. You can even password protect a zip. To assign a password to a Windows XP zip :
- Double-click zip to open it
- Click File
- Click Add a Password ...