Slipstreaming is when you integrate your original xp disk with the new SP1, basically for those that often reformat. It becomes a bit annoying to constantly have to then install the SP over a fresh install all the time. So if you slip stream your SP and xp disk, then you will not then have to reinstall the SP, because your xp copy will already be updated with the SP.
Handy to do with your MS Office disks as well