[psaltery]

I did not set up my pc's to share over my home wireless network, but suddenly today I see that all drives and the printer are available between each computer. I had tried to set up the computers to share months ago, but never got it to work and gave up.

The desktop is old, running WinME, one laptop is running WinXPpro, the other laptop is running Vista. They are all connected to a Westell router/dsl modem for internet through Verizon.

So, I turn the desktop off daily. Today I go to turn it off and it says the WinXP laptop is connected and do I really want to shut down. I go to windows explorer on both machines and sure enough I have access to the other drives on each computer. I start the Vista machine and see the same.

Am I compromised?

[lunarlander]

If you didn't make the change to share all drives, then somebody did. I would assume the worst. Time to reformat and reinstall.

Windows ME is past end of life, and no security updates are provided by MS. I wouldn't run it anymore. Maybe you'd want to try out some linux distros, some are quite good on old hardware. See this review:
http://www.linux.com/feature/52134

It seems you don't have a separate router, I would advise you to get one. I have a modem/router too but I also have a separate hardware firewall/router. The modem/router does NAT but I constantly see connections/attacks making it past the modem/router to my firewall. Having a separate router is a good thing.

Since you are using wireless, did you enable the encryption? If you have WPA or WPA2 use them and setup a long and complicated passphrase. Use WEP if you have no other choice cause WEP can be broken into real quick. You must enable encryption because with wireless, all your machines are sitting ducks when you have close range attackers, whereas with wired, at least you still have a perimeter which you can fortify with a firewall. Also it is especially important to have software firewalls on Each PC when using wireless.