What cable do u have between them? You need crossed over twisted pair.... like a regular CAT5 cable but with a few cables swapped over.
 
 
Have a look here:
 
 
http://www.homenethelp.com/web/explain/about-ethernet-crossover.asp
 
 
 
 
 
 

Yes, you'll need a crossover cable, look at the 2 RJ45 connectors at the end of the cable, you should see 8 colored wires, if both of them looks exactly the same with all the colors in the same order then its not a crossover. For a crossover you need to swop (If you´re wrking from left to right) cable 1 with 3 and cable 2 with 6.
If your cable happens to be a crosover already then the problem could be your network card settings. Check that both PC´s has been set up to the same speed network connection, you get Auto, 10MB with half and full duplex and there is 100MB with half and full duplex, I would suggest 100MB with full duplex.
OK, now, check the network settings, make sure that everything is set exactly the same on both PC´s except for the static IP address (it works better with static). Make it something like 172.16.0.1 on one PC and 172.16.0.2 on the other, but make the subnet mask the same on both PC´s, it should give you a default one of 255.255.0.0 after you´ve entered the IP address, this is good enough. If you still have problems you know where to go

Ohhh, Sorry ScinteX, I only saw now that you had the link in there about the cables, silly me, I could've saved myself a lot of time if I saw that before I wrote a story book answer.

Thanks for the help, I'll have a look at my friend's cable next time he comes over!