will it erase xp?

On step 4 (of the 7.04 version) it asks you how you want to install. The first option will shrink your windows partition and install a text based boot loader to allow you to choose either. This usually works fine but with some hardware some additional configuration could be necessary. If you select the second option "use entire hard drive" then windows will be gone so be careful. In any case, you should back up important stuff anyway. There is always a chance something could go wrong.

You should format the windows partition completely, only after that install ubuntu. Choose LILO to write intself to the MBR completely. Then simply install xp to a different partition and reconfigure LILO.

I would not recommend the above solution (Red@ktor). You can install Ubuntu whilst keeping your existing XP installation, as Jim Hutchinson has said. This will keep your existing data and will allow you to avoid having to re-install GRUB (not LILO - Ubuntu doesn't use LILO). It usually works, but sometimes it breaks things so you should be sure to back up your data (e.g. your My Documents folder) first.