The screen saver, as the name explains, saves the screen. One may wonder what the thing is from which the screen saver protects the screen. To understand this, we'll have to understand how images are displayed on your computer.
There are three types of displays on the marketL CRT (Cathode Ray Tube) monitors used in older desktops, plasma (used in high end systems for very high quality image editing), and LCD (Liquid Crystal Display) used in notebooks. Although these contain different materials, the basics of producing images are same for all three types (Ref Fig 1 below).
You must have come across the term "resolution" many times. You know that higher resolutions offer better image quality. Other than that, you also consider pixel depth while buying a notebook, digital camera, or HDTV. Greater values of pixel depth offer better clarity and more colors. Notebook display carries pixel depth of "eight" to display millions of colors. However, pixel depth is not related to Windows XP screen savers, so we will stop here!
Coming back to resolutions, if your LCD screen has "1280 by 800" resolution, it means that the entire screen is virtually divided into 1280 horizontal and 800 vertical lines. Each intersection of these lines carries a pixel (also called a dot or point). The pixels may be square (PAL) or rectangular (NTSC, 16:9 for Digital Video in HDTVs). PAL and NTSC are also not related to Windows XP screen savers but as the context came through, I thought of informing you that NTSC pixels offer high quality images than PAL on any digital display (TV, camcorder, digital camera, or computers).
Each pixel has three micro-regions, each capable of emitting only one of the following colors: red, blue, and green. Your computer display produces images using these three color combinations. The display receives continuous codes for producing images. Each code triggers photons rays (in CRT) to hit these regions with just enough force to produce light and illuminate the pixel to the desired color. The process is continuous. For a display with "800 by 600" resolution, the rays move from first pixel on the first horizontal line to the last hitting the relevant pixels to create the image. In case of LCD, semi-liquid crystals create thermal power to illuminate the pixels while in case of plasma, there are ions hitting pixels to create the image.