This tool tries to scan through the most common causes of network malfunctions and if it detects an abnormality in the network connection it tries to fix it. These connection problems typically occur with computers on home networks that connect to the Internet through a cable modem or through a digital subscriber line (DSL)/ADSL modem.

To detect issues in the network connectivity status, the Network Diagnostics for Windows XP process XPNETDIAG.EXE analyzes some network components which are most common to have issues. What it does is mainly that it performs some routine tests related to IP configuration, Default Gateway, Winsock, DNS, Firewalls, and Internet connectivity validation.
XPNETDIAG.EXE can perform communication with other computer systems using HTTP protocols, can make outbound communication with other computers, especially on Instant Messenger chat rooms, and create System Tray pop-ups, errors, security other messages. The process ( XPNETDIAG.EXE ) is encrypted using a software packing utility, and is also polymorphic meaning that it can adapt or change its structure.

Most home networks use either a stand-alone router/switch, home gateway method (cable modem and router together), or Internet Connection Sharing or another form of Network Address Translation (NAT) to access high-speed Internet. As a program or a process, it is not needed to be running for the smooth operation of Windows Operating System.
The Networks Diagnostic Tool for Windows XP can be download from: Microsoft Support Center