HIBERFIL.SYS is the file Windows saves a memory image to for Suspend-To-Disk (aka hibernation) mode. Hibernation saves the current system status (including opened programs and documents) when you shutdown, and restores it when you startup the computer. Booting a system after hibernation is very fast compared to normal booting, around 20 seconds instead of a minute. It's IMO a very useful feature.
Suspend-To-Disk is actually a bit hidden in XP, the settings are made in the power control panel, you hibernate either by setting the computer (hardware) power button to hibernate (in the control panel) or by shift-clicking Stand-By in the shut down dialog. If you don't use it (maybe it doesn't actually work for you), just untick "enable hibernation" in the control panel, the file isn't used anymore after that.
Edit: Well, Rahminator beat me to it.
