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If you see a recovery partition, you can try to use that partition, by press another one of the F-key when your PC starts up.
Otherwise, delete your current Windows XP partition by pressing the 'D' key on it.
Then press 'C' on the "Unpartitioned Space".
Then, type in the size of the partition and press Enter.

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If you don't know what size you need, just press Enter with the number that it is in there already. Then, you should return to the screen displaying all of your partitions. When you do, press Enter on the partition that you just created.
Then, you will be shown a screen where you will be prompted to choose a filesystem. The main decision that you have to make here is which filesystem to use. NTFS is a newer filesystem and FAT32 is an older filesystem. The main difference between the two is that NTFS can store files that are bigger than 4GB. But, FAT32 also has an advantage: Most Linux operating systems cannot give you write access to NTFS partitions and therefore, you need to use NTFS.

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So, you should select NTFS unless you use Linux, or there is another reason for selecting it. Also, be sure to choose the option that has (Quick) beside it. This will make a quicker format.
If you have very important files on your hard disk, and you don't want anybody to be able to recover them, you should choose the option without (Quick) beside it.
This will perform a full format.
The rest should be easy, setup will format the hard drive, then copy the contents of the CD on the hard drive. It will then restart the PC.
DO NOT boot back into the CD. In other words, do not "Press any key" when the message pops up.

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The installation will continue with about five steps. It will ask you general questions during the installation such as time zone and country. Also, it will ask you for a serial number for Windows XP. You can find this on a sticker, which should be somewhere on the case of your PC. Look at the back or side of your tower for a colourful sticker that says Microsoft Windows XP.
The serial number should be located on it. It is a series of alphanumeric characters. Or, if you purchased Windows XP separately, it should be on the box.
The rest of the setup should be very easy compared to what you have gotten through. Just follow the wizard and it will restart the computer into Windows XP. Then it will ask you a few more questions, before logging into the account that you created. AND THATS IT! You're done!