If you have multiple hard drives you may wish to skip ahead, as you can transfer files from your windows drive to another. IF you do not then you require a partition.
A parition seperates your drive so windows will treat it like 2 seperate drives, allowing you to destroy one, and leave the other completely intact!
I have not found any reliable freeware partitioning tools, that will work for all drive formats, but you can use the Partition Magic
trial. The full version is expensive so if you are not constantly using this product this will be enough.
You want to create a logical partition to store your precious data. while you format and install XP again.
(I actually encourage all computer users to divide their main drive for this very reason.. in the case of an accident where making the partition is impossible, this will be a life savor!)