Before you do anything...you should have a clear idea of how many partitions you want to make...and why...and how large each will be.
That needs to be done before you start...because you will not be able to change your mind (resize the partitions, add partitions, etc.) once you partition the entire unallocated space.
I would further suggest that some consideration be given to space needed by backups, assuming that you are interested in doing such...as well as ordinary space needs for data files (movies, music, documents, etc.).
A basic reference: http://support.microsoft.com/kb/309000
Generally speaking, you want to create primary partitions. There is a limit of four per hard drive, with your current install of XP residing on one. You can create more partitions, but it's like adding drawers to those in a chest...with each primary partition representing a chest used for storage.