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Turning off means that Windows closes all open programs and document, logs all users off and then completely turns off your computer. To start your computer again, you will have to press your computer's power button.
Restarting your computer means that computer closes all open programs and documents, logs all users off and then shuts down and starts Windows XP again, so that you will see Welcome screen again.
On most modern laptop and desktop computers there are two additional options - stand by and hibernate.
Stand by means that computer turns almost all its power off to save battery or energy. This does not mean that computer is completely turned off - all information about the running programs is retained in computer's random access memory (RAM, aka memory, read about Hard disks and Memory here). You can resume from standby by pressing computer's power button once and you will have all your running programs back on your monitor within seconds.
If your computer's battery runs out during standby or power outage occurs on desktop computer you will lose all information about running programs and this can potentially damage your computer's hard disk drive (HDD, aka hard disk) or information on it.
Hibernate or hibernation means that all information about running programs in computer's random access memory is written to a special file on computer's hard disk drive and after that process is complete, computer will be turned off completely. After you press power button again, all information in the special hibernation file is written back to computer's memory and you will have all your running programs back on your monitor within a minute or two.
Hibernation is a longer process than stand by, but as your computer will be turned off completely, you are not in danger of losing information or damaging components during power outage.
To shut down or restart your computer, open Start menu by clicking the green Start button or pressing Windows Key on your keyboard. Then click on Turn Off Computer:
You will then see a dialog with buttons Stand by, Turn Off and Restart. In case you have enabled hibernation, but you see no button with hibernation option, hold down Shift key on your keyboard while this dialog is open - this replaces Stand by button with Hibernate button. Choose your preferred action by clicking on one of those buttons. You can also click Cancel, if you want to continue working in Windows XP. 
You can also turn off or restart your computer when Welcome screen is displayed. Click on Turn off computer in the left lower corner:
Next, the same Turn off computer dialog is displayed where you can click either Turn Off or Restart buttons.
Looking for Windows Vista version of the article? Click here then.
Looking for Windows 7 version of the article? Click here then.
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