windows ME, like 95 and 98, is based on MS-DOS. DOS can only do one thing at a time, has no inherent security features, and no networking capabilities.
Windows XP, like 2k, is based on Windows NT. NT can do many things at once, even at the lowest level, has built-in security capability and networking.
WinME is one of the worst OS'es ever, IMHO... but winXP is probably microsoft's best desktop OS ever (also IMHO 😉)
edit: MSdos is a 16-bit OS... with some hacks for 32-bit stuff. NT is truly 32-bit.