The password-reset feature of Windows XP may not necessarily give you peace of mind. But rest assured you wouldn't wet your pants thinking about the day you forget the login password to your desktop.
The password-reset feature lets you create a floppy disk, which can be used to reset your user account password in case you forget it. The problem here is that if somebody else gets his hands on this floppy, then he can easily change your account's password and log in to your desktop.
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So make sure that you keep this floppy in a really safe place. Also, this floppy will only reset the password for the user account it's been created for, so nobody can carry it around resetting everyone's password on other systems.
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Ankit Kawatra