If you've been wondering why your XP desktop icons have a
background color, you'll be glad to know you can flip a checkbox
and have them go back to a normal transparent background.
Here's the two versions side by side.

To set the transparent background on the icons, we'll need to
open System Properties in Control Panel (or right-click on My
Computer and select Properties).
In this dialog, click the Advanced tab, and then the Settings
button under the Performance section.
Now scroll down to the button where you'll find a checkbox for
"Use drop shadows for icon labels on the desktop". Make sure you
check this box if you want transparent backgrounds on the icons.
Why this option isn't just labeled "Enable
Transparent Icons On the Desktop", is beyond me.
Update
If the above does not work, you might want to also check these
additional settings suggested by readers.
-
You can't be displaying a web page as your background. To
check this, right-click on the desktop and choose Properties.
Select Customize desktop on the Desktop tab, then select the Web
tab on the desktop items window and deselect any web pages that
are shown.
-
You need to make sure that High Contrast is not selected
under Accessibility \ Display Options in your Control Panel.