Make sure the modem is working properly. If you use dial-up
networking, does it connect OK? If not use Phone Dialer if you have
it (possibly not available on WinXP as far as I can see) to see
whether your modem will actually find a line and dial it. If you
don't have Phone Dialer look for a freeware one on Google.
If the modem's OK, make sure Fax is set up to use your modem
(Tools/ConfigureFax) and that 'enable send' is ticked.
If that's still OK, make sure your telephone line has a normal dial
tone. If not, set your modem to ignore the dial tone (Control
Panel/System/Hardware/DeviceManager/Modem Properties).
Don't make the mistake I made and try to test Fax by dialing your own
number (DUH! that one kept me guessing for a while before I cottoned
on)