Please take note (I've been told) that XP mode may require certain hardware to run (processor, chipset, bios, etc... ). XP mode will not run on just any machine.
For a while, this was true (mostly PCU dependent). After a while, XP Mode was changed to support most any modern processor.
Please note that XP Mode is not "dual boot", but a Virtual PC. There is a big difference. It is a virtual Windows XP computer running inside your Windows 7 computer. It is pretty cool.
Basically, you just get a window that looks like a whole new computer inside it, with Windows XP running. You are still running Windows 7 and all your other applications, there is just a window running XP in a separate window (that can be shut down, minimized, maximized just like any other window).