Ad hoc mode is method for wireless device to directly communicate with each other without central accesspoint network. In ad hoc mode devices communicate to each other in peer-to-peer fashion. To setup wireless network each wireless adapter must be configured for ad-hoc mode and must use same SSID and the same channel for communication.
Android smartphone manufacturer disabled ad hoc mode by default. your android could not detect ad hoc wireless network, only access point modes is supported. You can enable ad hoc to mobile by attain privileged to androids subsystems known as root access, read How to root your android .
Enable ad hoc in android
I used ZT-180 Adhoc Switcher to enable ad hoc to my android. Now download Connectify and start as Wifi Ad-hoc,Open hotspot. In windows xp Access Point option is not available, access point only available on latest version of windows (Windows 7 ,Windows server 2008 R2).
If you are working on these windows you no need to root your phone or install ZT-180 Adhoc Switcher, just install connectify and start it as access point and your android will detect it.
Connect to ad hoc network
Enable wireless and run ZT-180 Adhoc Switcher, it will ask for Super user permission, allow it and tap on Try to switch to Ad-hoc mode, just to try button.
Open wireless network connection in your computer, you will see AndroidTether in your wifi network list.
Double click on AndroidTether network it will begin to connect, you will see in your android also connecting to androidtether network.
Because wifi Ad hoc is non reliable network its very slow and sometimes not showing in network list.