I am currently using Windows 7 and I have XAMPP installed in the default folder so things might be different on your machine just Google them for your OS. Now lets get underway.
By default XAMPP sets up all the sites you create to have http://localhost as its top-level domain, and giving your site http://localhost/site as the url unless you install your site in the top-level folder. But what happens when you have multiple sites or you want to test out environments which would require you to have different domains, well I am going to teach you to do just that.