(FORTUNE Small Business) – Flash back to April 1981: The prime rate is 20%, the futuristic De Lorean is the hot car, communists rule Eastern Europe, and Microsoft ships MS-DOS, its first operating system. Funny how some things change. Today the prime rate is under 7%, Chrysler's retro PT Cruiser is the "it" ride, and Poland is a member of NATO, but you're still running a version of that same OS, which wasn't exactly good then. Until now.

Microsoft is finally burying DOS with its latest operating system, Windows XP. By now you've probably read about Win XP in news stories discussing its controversial new features and whether the government would stop Microsoft from shipping it without changes. On the merits, it's no surprise Microsoft's competitors would be concerned: XP is a much better desktop operating system than anything else out there. (At press time Win XP was still on schedule for an Oct. 25 release, and some new PCs will have it pre-installed in late September.)

Win XP represents the most significant change to your PC in at least six years, since Windows 95, yet the impact is generally under the covers. Yes, there's a new interface, and yes, it's a bit cartoony, with brighter colors and bigger, rounder buttons, but you can turn it off. You've probably also heard a lot about features that Microsoft has added that compete with products like RealPlayer and AOL Instant Messenger (see box, page 82). But in case you've been led to believe otherwise, these new features in no way prevent you from using competitors' products and can be easily ignored. For example, I have the new Windows Messenger and I have AIM, and they both work great.

The most important improvement is Win XP's incredible stability. Most of you run Windows 95 or 98, or Windows ME, all of which were built upon the now 20-year-old DOS base to ensure compatibility with all the software that had been written for earlier Microsoft operating systems. The tradeoff for that compatibility has been stability, and we're all too familiar with mysterious Windows crashes and unresponsive PCs. Win XP, built upon the platform of the enterprise-focused Windows 2000, makes both events rare, if indeed you ever see them. I've been using pre-release versions of Windows XP for several months, and one time my notebook failed to come back after being put in standby mode, but I've yet to see the crash-signifying Blue Screen of Death.

This added stability does not come at the expense of compatibility, as it did before if you ran Windows NT or Win 2000. Win XP goes to great lengths to fool programs that require older versions of Windows into thinking that it's, say, 1996 again. Programs and devices that failed to install on Win 2000, such as many graphics cards, are more likely to work correctly running Win XP. And there's built-in support for wireless networking, making it much easier to configure such a network than in previous versions, assuming your wireless-hardware vendor has the appropriate support software. My own wireless network didn't work until I talked the vendor into providing pre-release software to support XP, but that should be shipping by the time you read this. The only software that you'll need to replace are utilities like antivirus software and some backup programs written for Win 9x or ME, which won't work at all on Win XP.

On the hardware front, Win XP demands the sort of power that only recent PCs provide. Microsoft says you should have a 300MHz Pentium II or better, but I'm running a 266MHz Pentium II with no problems. Much more important is how much memory your PC has. Although Microsoft says that the minimum is 64 MB, and 128 MB is recommended, I ran a beta of Windows XP on 96 MB of RAM, and it was noticeably slow. Think of 128 MB as a comfortable minimum. Finally, make sure you have at least 2 GB of free disk space before upgrading.

If you upgrade, you must decide which version to buy: Home Edition or Professional Edition. Pricing will be slightly more expensive than for previous Windows versions. An upgrade for the Home Edition will cost $99, and the Professional upgrade will be $199, about $10 more than for Win ME and Win 2000 Professional, respectively. Can you use the Home Edition in the office? The biggest difference between the two is that if you're running a Win NT or Win 2000 server in your office, there will be features of your network that Home won't be able to use. If you're not sure and you want to gamble, you will be able to upgrade from Home to Pro.

When you first fire up your new copy of Win XP, you may be asked to "activate" it. Activation is an antipiracy system Microsoft uses to make sure you're not running the same copy of Windows XP on more than one computer. Activation is controversial because of the overblown issue of how it scans your system configuration anonymously, but the number of people who will be inconvenienced by it is minimal. If you buy a PC pre-installed with Windows XP, many manufacturers will activate it for you. And if you get a site license for your business (which starts at five users), activation isn't required. You shouldn't have a problem unless you change at least three components in your system's hardware configuration, such as upgrading your network and video cards and adding a new hard disk. And even then, reactivation involves five minutes on the phone.

So, should you get it? The more important question is whether you're happy with the way your computers run now. Even with a much older operating system, if you use it to perform fairly simple tasks and it does them well, there's no point in messing with a good thing. If you're unhappy with your PCs' reliability, Win XP should improve the situation. Upgrade only systems bought fairly recently, say, in the last 12 to 18 months, if you want a happy experience. Although you should certainly get Win XP pre-installed on all new PC purchases, it isn't worth buying a new machine just to be able to run the new OS, for all its virtues.

For years the (deserved) rap on Microsoft has been that Windows is unreliable, and those years have been worse on us than on the company. Windows XP finally gets Microsoft (and us) out of the hole it dug for itself by always patching DOS rather than starting over. Get ready to worry a lot less about everyday computing.