It is a hosting wrapper with the code that is in common
for services so that each only needs to implement its own
specific code and not reinvent the wheel each time.
Yes, it, or more correctly, some instances of it, are needed
for Windows XP. It is possible that you have an instance
that is not needed, or that you have something within one
that is not needed. However, if that is so, then your machine
was compromised just in order to make it so, and thus you
would have other issues needing attention also.
tasklist /s
(if I recall correctly, not at XP right now, might be /svc) will
list out the services loaded in each instance
