Say you have gadgets and more than one computer at your home which you want to connect to internet at the easiest possible way using the only internet connection available to you. You can use your existing single internet connection (Wired/Ethernet connection for Wireless connection see this article) to connect to other devices wirelessly creating a temporary wireless network called Ad-hoc Network. The only limitation in such kind of wireless home networking with ad-hoc network is that your incoming internet connection must be Ethernet and the outgoing be Wireless.
First of all create an Ad-Hoc wireless network in your computer (XP, Vista or 7) from Network and Sharing Center in Control Panel, here we screencast on Win 7 step by step.
What is an ad hoc network? sometimes called a computer-to-computer network, an ad hoc network is a temporary network used for sharing files, presentations, or an Internet connection among multiple computers and devices. Computers and devices in ad hoc networks must be within 30 feet of each other. If you’re currently connected to a wireless network, you might be disconnected when you set up this network.
Supply the network name, security type, security key for this ad hoc network. Don’t forget to save this network to your list of connection.
This ad hoc network will appear in the list of wireless networks and will stay active until everyone disconnects from it or go out of wireless range or you can permanently delete the connection. People who have the network name and security key (if assigned) to people whom you want to connect to this network.
To share files, go to Network and Sharing Center in Control Panel and turn on file sharing.
To share internet, turn on Internet Connection sharing.
If you share your Internet connection, Internet connection sharing (ICS) will be disabled if you disconnect from the ad hoc network, you create a new ad hoc network without disconnecting from the old ad hoc network for which you enabled ICS, or you log off and then log back on (without disconnecting from the ad hoc network).
If you set up an ad hoc network and share your Internet connection, and then someone logs on to the same computer by using Fast User Switching, the Internet connection will still be shared, even if you didn’t intend to share it with that person. This and other detail information can be found on the Help Center of Windows 7.