No, that doesn’t mean that you have to install the PPP protocol as it seems.
What it means is that you are dialing into an existing VPN host run through Windows XP but you did not get assigned an IP address. You’ve setup the “Incoming Connections” item under Network Connections ALMOST correctly. However you’ve left the “Assign IP address via DHCP” box checked. You would think this would make sense, however, if you are not running your network DHCP through that server and instead it is run through a router, this will not work. So, what you must do is choose a range of IP addresses. That’s the second radio button on that screen. Give it some sufficiently high range so that it won’t realisticly interfere with your router. Stay within the subnet defined by your netmask of course.
So, if your machine’s IP is 192.168.100.10, make your address range be 192.168.100.100-192.168.100.110. Then you can have up to 10 VPN clients connected. Make your range 192.168.100.10-192.168.100.10 if you are the only one to be using it.
Hope this helps. I keep forgetting about this setting myself. Maybe I’ll remember now that I’ve written it down.