I am currently using xampp on Windows XP and when working with WordPress find it particularly convenient for setting up a local copy of the site for development.
To set up the aliased site do the following:
1) Update the hosts file in windows.
For Windows XP this is located here:
2) Add the virtual host to apache in xampp by editing this file:
See documentation here or just read the comments contained in the file.
3) Restart apache server.
4) For Worpress edit the wp_options table to add the correct value for siteurl and home eg. http://mysite.local