Microsoft Knowledge Base Article 313296 contains the following summary:
This step-by-step article describes how to connect to peripheral devices with by using infrared light.
Windows XP provides computers with the ability to connect to peripheral devices, such as printers and modems, by using infrared light, in the same way that a TV remote control sends signals. This is especially important to users of laptop and notebook computers, because they often need to easily connect to peripherals at a variety of locations. Use of infrared connections eliminates the need to carry the cumbersome and expensive cables that otherwise might be required. Under Windows XP, infrared connections are established by using the standards and protocols that are supported by the Infrared Data Association (IrDA).
Many new laptop and notebook computers support infrared connections. In addition, a wide range of peripheral devices, such as digital pagers, personal digital assistants, electronic cameras, organizers, cellular phones, and hand-held computers, are capable of infrared connections. If a device has an infrared transceiver, you will see a small, dark red window on it.