Wireless networks have varying degrees of security. For a home or small office,  following are the recommended choices for authentication and encryption:

• Open system authentication with Wired Equivalent Privacy (WEP) encryption, referred to hereafter as Open system/WEP.

  If the wireless network that you are connecting to uses standard encrypted communication, select  Data encryption as WEP and network authentication as Open option, and then uncheck the option for The key is provided for me automatically.

  Figure: Open system/WEP Wireless encryption settings:

  

  You should use open system/WEP only if all of your network devices do not support WPA. Microsoft strongly recommends using WPA-capable wireless devices and WPA-PSK/TKIP.

• Wi-Fi Protected Access (WPA) preshared key (PSK) authentication with Temporal Key Integrity Protocol (TKIP) encryption, referred to hereafter as WPA-PSK/TKI. For more information about WPA and TKIP, see Wi-Fi Protected Access (WPA) Overview.

Changes Required to Support WPA.

 WPA requires software changes to the following:

·          Wireless access points

·          Wireless network adapters

·          Wireless client programs

NOTE: The new Encryption Standard Wi-Fi Protected Access (WPA) is not supported under the current Windows XP operating system prior to service pack. Please follow the instructions in Microsoft Knowledge Base Article - 815485 Overview of the WPA Wireless Security Update in Windows XP to obtain WPA functionality.  WPA support, previously only available as a free download for computers running Windows XP with Service Pack 1 (SP1), is included in Windows XP Service Pack 2 (SP2).  

 Because there is typically no central authentication server in the home or small office, someone in the home or small office must do one of the following:

• For open system/WEP, they must choose a strong WEP key and configure all of the computers and wireless devices to use open system authentication, WEP encryption, and the same strong WEP key.

• For WPA-PSK/TKIP, they must choose a strong WPA-PSK and configure all of the computers and wireless devices to use WPA-PSK authentication, TKIP encryption, and the same strong WPA-PSK.

Note: A strong key is one that uses a random set of hexadecimal digits (for the WEP key) or characters (for the WPA-PSK) for the largest possible key size.

In either case, wireless network setup can be complicated for the novice user because each wireless device has a different method of configuring authentication and encryption settings. For example, a wireless access point (AP) might use a wizard or a set of Web browser pages to configure a specific authentication method, encryption method, and the WEP key or WPA-PSK. For computers running Windows XP with SP2 or Windows XP with SP1, you configure authentication, encryption, and either a WEP key or WPA-PSK on the Wireless network properties dialog box for a specific wireless network, available from Wireless Networks tab for the properties of the wireless LAN adapter in the Network Connections folder.

To make the configuration of a WEP key or WPA-PSK much easier, Windows XP with SP2 supports Windows Smart Network Key (WSNK), a new feature of wireless devices that automates wireless network configuration. Windows XP with SP2 supports WSNK through updates to the wireless client software and a new Wireless Network Setup Wizard.

The Wireless Network Setup Wizard steps you through the configuration of wireless network settings, wireless network name, the authentication and encryption method, and a strong WEP key or WPA-PSK and then writes that configuration as a set of Extensible Markup Language (XML) files on a Universal Serial Bus (USB) flash drive (UFD). You then plug the UFD into other wireless devices in the home or small office that support WSNK. All of the wireless devices that support WSNK automatically read the settings from the XML files stored on the UFD and configure themselves with the same settings as the computer on which the Wireless Network Setup Wizard was initially run. This new feature of Windows XP SP2 and other wireless devices, which have a USB port and support WSNK, greatly simplifies the configuration of strong security for wireless networks in the home or small office.

Running Wireless Network Setup Wizard after applying Service Pack 2: CLICK HERE

• The new authentication and encryption method available now is WPA2™ PSK, see Wi-Fi Protected Access 2 (WPA2) Overview. 

Changes Required to Support WPA2:

Please see http://www.microsoft.com/technet/community/columns/cableguy/cg0505.mspx

For more information on implementing WPA2, check

http://www.microsoft.com/windowsxp/using/security/expert/bowman_wirelesssecurity.mspx

http://www.microsoft.com/technet/prodtechnol/winxppro/maintain/wifisoho.mspx

Microsoft has released WPA2/WPS IE Update, a free download that updates the wireless client components in Windows XP with Service Pack 2 to support WPA2.  This updates makes it easier for you to connect to public Wi-Fi networks (otherwise known as "Wi-Fi hotspots.") to which you have not previously connected.

Screen shots of various Encryption and Authentication methods:

                        [WPA2]                                                           [WPA]                                                 [WEP]