It's true. All versions of Microsoft Windows 'rot' over time, Windows XP does it slower than all the previous versions, but it still happens (Windows Vista isn't supposed to due this, but I doubt that given Microsoft's track record over the last 20 years.)
This 'rotting' happens mostly as a result of software being installed, uninstalled, patched, hotfixed, upgraded, etc... During any of these processes programs tend to alter windows system elements and/or add/subtract files incorrectly due to either being poorly written or because they conflict with the other progams in the system/the operating system itself (think of programs like medications in this respect, the more that are being taken the more likely they are to have negative interactions with one another and the host) and this eventually reaches a critical mass where the system experiences major slowdows that make it virtually unusable, serious program malfunctions, or the system just stops working all together.
The average person should probably do a clean Windows OS installation/clean image restoration once a year give or take in order to keep their system stable and running at full performance. I do it every 4-6 months since my system gets such a ridiculous amount of use. When it should be done has more to do with how much you use your system rather than any specific amount of time. Think of it like an oil change, the harder you ride your car the more frequently you need to change you oil, the same applies to your computer in this situation.
