Step 3: Select the newly created virtual machine, click Power on to start installing Windows XP. If you have no idea, launch VMware, click Create a New Virtual Machine, browse to your Windows XP ISO file or your CD/DVD drive, enter a name for your new virtual machine, select a location to save the virtual machine, specify virtual disk size and finally click Finish button. Most of Windows users know how to install an operating system in VMware player. Step 2: Next step is to install XP in VMware Player.