Okay find the patch file you downloaded.
Right click on it.
A popup menu appears
Select Extract
A dialog box appears.
it asks you the location where you want to extract the files to.
the default will be a new folder that is contained in the current folder the file is in now.
This is fine for our purposes here. So hit next button.
The program should now being extracting itself
Basically a "Zip" file is one or more files that have been compressed down to make them smaller for transmission over the internet, In order to uses these files you must then uncompress them. XP has built in software to handle this form of compression, you may need special programs to uncompress other types, such as RAR, these special programs are available for free download at various sites. That is not important now though.
Once it is finished you will notice that you have a new folder in the current folder you were looking at, Or on the desktop if you had downloaded the file to there. Click on that folder to open it, it should contain an EXE file, these are the type of file you can run directly.
So now just double click on it and it should run a little program to patch your game to 1.08.
You can then delete either the ZIP file or the EXE file, or both. However I usually keep one copy so I Do not have to look for or Download the patch if I uninstall the game and want to reinstall it. In which case I would need a fresh install from the CD and then reapply the patch to the new install.
Hope this all made sense, let me know what you need clarification on.