Microsoft Windows is called a Network Operating System. Computers running an operating system like Microsoft Windows (any of the many versions) were designed to be networked. As I've said elsewhere, if you have one computer, you have the beginning of a network.
The minimum complement of equipment, that you need for a computer network, is 2 computers and the appropriate networking components. The simplest networking component set would be two Ethernet adapters (one in each computer), connected by a bit of Ethernet cable, generally (but not always) a cross-over cable.
That's an ad-hoc Ethernet network. It's similar to hub (router / switch) based Ethernet networking, but without a hub (router / switch).
You can also have a network without any Ethernet cable, if you replace the Ethernet adapters with WiFi adapters. That's called an ad-hoc WiFi network.
An Ethernet based ad-hoc network is frequently limited to 2 computers. An Ethernet cable has just 2 ends - to get any more, you need a hub (router / switch). With a WiFi based ad-hoc network, you can have any number of computers connected, with minimal effort.
But there are several disadvantages to ad-hoc WiFi networking.
- One of the biggest is security. The minimum acceptable standard for WiFi security is WPA. Unfortunately, WPA requires a WiFi Access Point, to manage authentication / encryption. With no WAP, you're limited to using WEP to protect yourself, and WEP just isn't adequate security.
- With a router "in charge" of the network, you'll generally get more throughput. Client - server (with the server in charge) is more efficient than peer - peer (with no one in charge).
- Most WiFi equipment, in ad-hoc mode, will only operate in 802.11b mode, and get up to 11M of bandwidth total.
- Without a router, and a DHCP server built-in, you'll have to use ICS (if you're sharing Internet service), or pre-assign fixed IP addresses to each computer.
- You'll have to pre-assign channel number and SSID on each computer, as the normal WiFi Client won't find your ad-hoc network by scanning. Nor will it give you a signal strength indicator.
- You won't be able to disable SSID broadcast (not that this is a bad thing). In ad-hoc mode, SSID broadcast is forceably enabled.
Remaining aware of the limitations of ad-hoc WiFi, see specific details of the setup process
- About.Com How To Set Up an Ad Hoc (Peer) WiFi Network
- Microsoft Experts: Making the Wireless Home Network Connection in Windows XP Without a Router
- Microsoft Windows Vista Help: Set up a computer-to-computer (ad hoc) network
- Microsoft Windows XP Help: Set up a wireless network without a router
For a quick LAN, ad-hoc WiFi is OK. In an otherwise secure environment (maybe a single conference room deep within your office complex) it's perfect for a quick conference, and application sharing. For long term, really secure networking, though, you can't beat a properly setup, router (WAP) based network.