NOTE: This is not needed for Windows 7, where you can press and hold the shift key, then right click on a folder and select "Open Command Window Here"

For earlier versions (e.g. XP), do the following.
Right-click on the CmdPromptHere.reg file and choose 'Merge' or just double-click on it.

You will then be able to right-click on a folder and choose 'Command Prompt Here'
to open a command prompt in that directory.