Use some other HDD or some other drive in the same HDD.
But remember, when installing in the same HDD always take a backup of the hidden file "ntldr". It is hidden somewhere in C: or your WinXP drive, and is easily searchable.
The benefit of doing so would be that while installing Windows 7, sometimes, the file gets deleted automatically, preventing you from booting Windows XP ever again. By taking a backup of the file and noting down the location of the file, it can be easily pasted back to its original location if it gets deleted so that you're able to boot for Windows XP as well as Windows 7 from the same HDD.
If you choose to install both the OSs in different HDDs, however, then you need not do anything.