This tutorial at HowtoForge provides step-by-step instructions on how to install Xen (version 3.0.3) on a Debian Sarge (3.1) system.
Read it here
I will use Debian Sarge for both the host OS (dom0) and the guest OS (domU). I will describe how to install Xen from the sources (which I recommend) in chapter 4 and from the binary package (chapter 5). In an additional section at the end of chapter 4 (chapter 4.5 ) I will also show how to create a virtual local network with virtual machines, with dom0 being the router. Chapters 4 and 5 are mutually exclusive.