When you open the volume control from the notification area of Windows XP, you get volume controls shown for different devices. If you have more devices, each will have its own volume control shown taking a large space on your screen. Although you have the option to show or hide whichever volume control you want but still normally it occupies much space on screen as shown.
Here's a small tip to reduce the size of this volume control which will remove the icons from the volume controls which will make it smaller to accommodate more volume controls on the screen. Just press ctrl+S, when the volume control is open to make it show in shorter version.