Can't help with the Xbox thing, but the settings (as I know about them) are like this...

If you have a Linksys accesspoint/router there is help in the right hand margin for every feature. Very useful (MUCH better than the simple brochure included)

WEP - encrypted transmissions from access point/router to PC. Secures your radio signal from someone listening and reading your data.
MAC address filtering - locks your AccessPoint/Router from someone hitching ride on your network to surf the net or your hard drive files. (personally I think this is more important to turn on)
SSID - turn off the broadcast to prevent oursiders from seeing your access point.

Hope this answers some of your questions.