Windows XP Embedded, or XPe, is the componentized version of Microsoft Windows XP Professional and the successor to Windows NT 4.0 Embedded. XPe is based on the same binaries as XP Professional, but XPe is marketed towards developers for OEMs, ISVs and IHVs that want the full Win32 API support of Windows but without the overhead of Professional. It runs existing Windows applications and device drivers off-the-shelf on devices with at least 32MB Compact Flash, 32MB RAM and a P-200 microprocessor. XPe was released on November 28, 2001. As of February 2007, the newest release is Windows XP Embedded SP2 Feature Pack 2007.
XPe is not related to Windows CE. They target different devices and they each have their pros and cons which make them attractive to different OEMs for different types of devices. For instance, XPe will never get down to the small footprint that CE works in. However, CE does not have the Win32 APIs XPe has (although CE has an API that is similar to the Win32 API), nor can it run the tens of thousands of drivers and applications that already exist.