Here's a few simple steps that should get you sorted.
1) Download and burn GParted. It's a free disk partitioning tool.
2) Boot from the Gparted disc and use it to resize your XP partition (The interface is reasonably simple to learn, so just read carefully).
3) Create a new partition in the resulting free space, and format it to NTFS.
4) Restart the PC (you will be prompted to remove the GParted disc).
5) Boot from the Windows 7 disc and install normally to the new partition.
And voila! You should now have a fully functioning dual-boot system. Check back here if you have questions.