Sounds like you need to install the mouse software. Checking MS's site, I see that the mouse works with XP but requires additional software in order to function. "Works with XP" in this case means that the mouse software can be installed on XP.
From what the site says, the mouse should have come with a CD. If you have that, use it to install the necessary software.
If you don't have the CD for some reason, you can download the software from MS.
This should be the direct link for it.
If, for some reason, that doesn't work for you...
This is MS's page about the mouse. On the right side of the page, there's a section that says "Downloads." The "How To Guide" will most likely walk you through the steps you need to take to get the thing working. Just below that is the "Download Software" link. Click that, fill out the form (use the pull-down menus to tell it that it's a mouse, which mouse, what OS you're using, and what language you want), and you should be taken to the page from the first link I gave you, where you can download the Intellipoint software.
Paul
