Solution: For Windows XP, open the Control Panel > Sounds and Audio Devices properties sheet. On the "Audio" tab, for Sound Playback > Default Device click on the 'down arrow' and check to be sure the proper audio device is selected. Typically, in the case of this problem, something like "modem line 0 playback" has replaced the proper audio device as the default.
Changing the selection back to the correct device will fix the problem with no reboot necessary in Windows XP. In other Win OS setups reboot may be required. You can use AIDA32.exe, or Everest, downloadable from MajorGeeks and other sites, to identify the sound device(s) on your machine.
This problem occurs frequently enough (often after reinstallation of or changes/updates to Windows) to be described frequently in help forums. The issue and most likely solution has not changed much since 1996 or earlier, when I first encountered it as a novice. The most common cause is the selection of the wrong - typically the modem - device as the default instead of the sound card. The modem cannot play many of the files used for system sounds! Or respond to Media Player sound features. The first step, ALWAYS, is to check and make sure that the right sound device is selected as default in audio device setup.
Unfortunately advice given for this situation is often misdirected. Typically, advice is given to uninstall and reinstall the audio card - sometimes recommending physical removal and reinsertion of the card or even its replacement - or reinstallation of the sound card drivers or installation of entirely new drivers for the card. Sometimes users are told they will have to reinstall Windows. (Of course new drivers will be needed when the OS has been upgraded, as from Win 98 or ME to Win XP.)
All of these things may - in some cases they apparently do not - result in correction of the basic problem by forcing the correct selection of the default device. But that seems a lot of trouble to go through, just to change the default device from the modem - or some other obsoleted and redundant device - back to the device which should be handling sound on the machine.