Per Microsoft....

System Restore overview:
System Restore is a component of Windows XP Home Edition that you can use to restore your computer to a previous state, if a problem occurs, without losing your personal data files (such as Microsoft Word documents, browsing history, drawings, favorites, or e-mail). System Restore monitors changes to the system and some application files, and it automatically creates easily identified restore points. These restore points allow you to revert the system to a previous time. They are created daily and at the time of significant system events (such as when an application or driver is installed). You can also create and name your own restore points at any time.

Notes

Restoring your computer does not affect or change your personal data files. It is a good idea to back up your data files periodically. For example, you might copy your data files to removable media, such as a writable compact disc, once a week.