^^ This is a common misconception. Did you ever notice on any ipconfig the following two lines, particularly the second?
Dhcp Enabled. . . . . . . . . . . : Yes
Autoconfiguration Enabled . . . . : Yes
That second line is significant, because what it’s saying is this PC will automatically configure itself in the absence of a DHCP server.
Each PC randomly generates an APIPA address (169.254.x.x) and then makes an ARP request to see if by chance the IP has been duplicated. Unlikely, but if it has, it generates a new APIPA IP address and tries again, until eventually every PC is unique. And those are perfectly valid IP addresses. It’s designed for precisely these circumstances, where there is no DHCP server, so communications can still be established. The reason we tend to think these are INVALID is because most of the time we DO expect to find a DHCP server.
As far as crossover cables, we’re long past those days. Yes, there’s always the remote chance this could be a problem, but that would require *both* PCs to be quite old. As long as one side is even a relatively modern PC, auto-sensing MDIX will make sure the connection’s polarity is correct. Even if you have many PCs using a switch, as long as the switch supported auto-sensing MDIX, it would work even if *every* PC didn’t!
So in 99% of the cases, you don’t have to do anything but patch the PCs together. It just works. And which is why I *intentionally* don’t mention it (I used to, but not anymore).
http://support.microsoft.com/kb/220874