Creates a process and runs command with same permissions as user running SQL Server service.
Disabled by default in 2005 and 2008.

Can be enabled by running:

-- To allow advanced options to be changed.
EXEC sp_configure 'show advanced options', 1
GO
-- To update the currently configured value for advanced options.
RECONFIGURE
GO
-- To enable the feature.
EXEC sp_configure 'xp_cmdshell', 1
GO
-- To update the currently configured value for this feature.
RECONFIGURE
GO

Also by running surface area configuration utility in 2005

In 2008 this is a facet which can be accessed by running SSMS, right click server, select facets and then Surface Area Configuration from drop down list.