Windows XP Service Pack 3 (SP3) was released to manufacturing on April 21, 2008, and to the public via both the Microsoft Download Center and Windows Update on May 6, 2008.
It began being automatically pushed out to Automatic Update users on July 10, 2008. A feature set overview which details new features available separately as standalone updates to Windows XP, as well as backported features from Windows Vista has been posted by Microsoft. A total of 1,174 fixes have been included in SP3. Service Pack 3 can be installed on systems with Internet Explorer versions 6, 7 or 8. Internet Explorer 7 and 8 are not included as part of SP3.
 New features in Service Pack 3
* Turns black hole router detection on by default
* Network Access Protection client
* Group Policy support for IEEE 802.1X authentication for wired network adapters.
* Credentials Security Service Provider
* Descriptive Security options in Group Policy/Local Security Policy user interface
* An updated version of the Microsoft Enhanced Cryptographic Provider Module (RSAENH) that is FIPS 140-2 certified (SHA-256, SHA-384 and SHA-512 algorithms)
* Installing without requiring a product key during setup for retail and OEM versions
 Previously released updates
Service Pack 3 also incorporated several previously released key updates for Windows XP, which were not included up to SP2 including:
* Windows Imaging Component
* IPSec Simple Policy Update for simplified creation and maintenance of IPSec filters
* Background Intelligent Transfer Service (BITS) 2.5
* MSXML 6.0 SP2 and XMLLite
* Microsoft Management Console 3.0
* Credential Roaming service (Digital Identity Management Service) update
* Remote Desktop Protocol 6.1
* Peer Name Resolution Protocol 2.1
* Network Diagnostics update
* WPA2 Update (KB893357)
* Windows Script 5.7
* Windows Installer 3.1 v2
Slipstreamed retail and OEM versions of Windows XP with SP3 can be installed and run with full functionality for 30 days without a product key, after which time the user will be prompted to enter a valid key and activate the installation. Volume license key (VLK) versions still require entering a product key before beginning installation.
XP SP3 is a cumulative update of all previous service packs for XP, the service pack installer checks HKLM\SYSTEM\CurrentControlSet\Control\Windows\CSDVersion registry key to see if has a value greater than or equal to 0x100, if it does it will allow the update to proceed, otherwise it will prompt to install either XP SP1 or SP2. Since SP1 is no longer available for full download, it would need to be downloaded using Windows Update. The other option is to manually change the registry key, in essence fool the installer into thinking SP1 is already installed.
However, it is possible to slipstream SP3 into the Windows XP setup files at any service pack level—including the original RTM version—without any errors or issues. Slipstreaming SP3 into Windows XP Media Center Edition 2005 is not supported.
Service Pack 3 contains updates to the operating system components of Windows XP Media Center Edition (MCE) and Windows XP Tablet PC Edition, and security updates for .NET Framework version 1.0, which is included in these Windows XP SKUs. However, it does not include update rollups for the Windows Media Center application in Windows XP MCE 2005. SP3 also omits security updates for Windows Media Player 10, although the player is included in Windows XP MCE 2005. The Address Bar DeskBand on the Taskbar is no longer included due to legal restrictions. It also removed the Energy Star logo from the ScreenSaver tab of the Display properties, leaving a very noticeable blank space next to the link to enter the Power Management control panel.
source from wikipedia.org