Install the current version of cygwin.
Download the setup.exe from cygwin.
Run this file and select Install from Internet. After selecting a mirror site, it will let you select the packages you want to install. By default, cygwin installs a minimal set of packages, which is not enough in most cases. If you use cygwin not only for xfig, but also for other applications, and you have enough disk space, you can install all packages. If you only want to run xfig, you only need to install some packages. When selecting packages, be patient since cygwin may need several minutes to compute the dependent packages of the one you are selecting.
(Note about packages: if you use MikTeX (a TeX distribution for Windows), do not select the ghostscript packages in the Graphics category and the teTeX packages in the Publishing category)
After you have selected the packages that you want to install, you can go through the rest of the setup procedure following the instructions of the setup program. It is assumed that you have installed cygwin on d:cygwin in the following steps. However, you can install cygwin anywhere as long as there is no space in the directory names.
For your convenience, mount some directories by running the following commands in the cygwin window. You must have the administrators privilege to do this if you are using NT/2000/XP. You can mount more if you have more drives.