By default, Windows has a standard set of user groups which are built into the system. Probably, the two most well known are Administrators and Users. For an easy to understand and in-depth explanation of the standard user groups, check out this page titled “Over View of All Groups in Windows XP“.
Typically most Windows users have their account set in the Administrators group so they can do whatever they want anytime they want (which is why viruses and malware are a problem), but you could probably get by as just a standard User or Power User. If you were to do this then you would only need to log in as an Administrator when you are installing a new program or updating your system. Of course, this isn’t for everyone but running as a standard user means any program you execute runs with standard user rights so if you were to run a malicious program, it would be denied from modifying any of your system settings which is a huge security benefit.
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That would be for XP Pro. XP Home only has “Administrator” and “Limited”. Probably that is the reason most people run as administrator because the Limited account is indeed very limited.