There is a setting that controls whether the icon labels on the desktop have a drop-shadow with transparent background or are flat text on the system background color. If you don't use desktop wallpaper, it really doesn't make a difference. But if you do, the icon labels will create ugly rectangular cutouts in your background image.

 The designers of Windows XP decided to hide this setting so you'd never find it without a guide. The Display Properties applet defines most of the attributes of the desktop, but not this one. Here's what you must do in order to bring back the transparent background for your icon labels:

Right-click My Computer.

Choose Properties.

Click the Advanced tab in the dialog that appears.

Click the Settings button in the panel labeled Performance.

Click the Visual Effects tab in the Performance dialog.

Check the box titled Use drop shadows for icon labels on the desktop.

Click OK, OK.