The essence of computer networking is that computers share data or resources. "File and Printer Sharing" is Microsoft's descriptive name for this function in its networked Windows and NT systems.
Though this information does apply broadly, this page is written with the home PC user in mind. It's an attempt to explain Windows file sharing in the context of computer networking, not merely in terms of the superficial open-this-click-here mechanics of the Windows interface.
Most people who've used the Internet for very long have encountered networking terms like TCP/IP (Transmission Control Protocol/Internet Protocol), FTP (File Transfer Protocol), and so forth; and they often have at least a rudimentary idea what such terms mean. But I find few Windows users who are familiar with the networking which is built into their own machines.
The "native" network software of Win9x/NT machines, while similar in many respects to Internet (IP) networking, is NOT the same thing. It consists primarily of NetBIOS -- Network Basic Input Output System.
NetBIOS is software that allows applications on different computers to communicate within a local network. It was originally created by IBM for use in early PCs, was adopted by Microsoft, and has become a widely-supported standard.
NetBIOS is quick and efficient on a small network. Computers on the LAN (Local Area Network) typically connect in a sort of daisy-chain along a single cable. Data is simply sent out via the network interface (an add-on card in the computer) and in effect is broadcast to all machines on the LAN. No routing outside the LAN is involved or supported.
Because NetBIOS does not contain a mechanism for routing data outside its LAN, applications communicating on a segmented network (often called an enterprise network) or WAN (Wide Area Network -- the Internet is a WAN) must use a "transport protocol" such as IPX or TCP/IP.
The IPX (Internetwork Packet eXchange) protocol, enabled by default on Win/NT machines, is comparable in function to IP. IPX establishes the format of network data packets and like TCP/IP, can serve to implement NetBIOS over a larger network.
NetBIOS is typically paired with a protocol called NETBEUI (Netbios Extended User Interface), an extension of NetBIOS which also serves to implement NetBIOS over a WAN.