Microsoft Knowledge Base Article 307897 contains the following summary:
This article describes how to synchronize the time on your computers by using the Windows Time Service.
In Windows XP, the Windows Time service automatically synchronizes your computer's internal clock with other clocks in the network. The time source for this synchronization varies, depending on whether the computer is joined to an Active Directory domain or to a workgroup.
When the computers are part of a workgroup, you must manually configure the time synchronization settings. You might identify a computer as a locally reliable time source by configuring the Windows Time service on that computer to use a known accurate time source, either by using special hardware or by using a time source that is available on the Internet. You can configure all other workgroup computers manually to synchronize their time with this local time source.
If the computers belong to an Active Directory domain, the Windows Time service configures itself automatically by using the Windows Time service that is available on domain controllers. The Windows Time service configures a domain controller in its domain as a reliable time source and synchronizes itself periodically with this source. You can modify or overwrite these settings, depending on your specific needs.