Microsoft's release manager for the Windows XP Service Pack 3 (SP3) posted on the Microsoft TechNet forum that the long awaited update for Windows XP is a go.

Update 04/29/08:
Update on Windows XP SP3 Download availability

Windows XP SP3 has been released to manufacturing (RTM). Windows XP SP3 is on its way through our manufacturing channels to be available to OEM and Enterprise customers.
On April 29th Windows XP SP3 will be available via Windows Update and the Microsoft Download Center. For customers who use Windows XP at home, Windows XP SP3 Automatic Update distribution for users at home will begin in early summer. I am not quite sure why this exclusion would apply if Microsoft makes SP3 available through windows Update on April 29th.

More details on Microsoft TechNet.

Windows XP SP3 includes all previously released Windows XP updates, including security updates and hotfixes, and select out-of-band releases. Windows XP SP2 was released in August 2004.

SP3 does include Network Access Protection (NAP) to help organizations that use Windows XP to take advantage of new features in the Windows Server 2008 operating system.
The new XP Service Pack also rolls up the following features: MMC 3.0, MSXML6, Microsoft Windows Installer 3.1 v2, Background Intelligent Transfer Service (BITS) 2.5, IPsec Simple Policy Update for Windows Server 2003 and Windows XP, Digital Identity Management Service (DIMS), Peer Name Resolution Protocol (PNRP) 2.1, Wi-Fi Protected Access 2 (WPA2) and "Black Hole" Router Detection.

Windows XP SP3 is cumulative, so you can install SP3 on top of Windows XP SP1 or SP2.