"Windows Reduction" is a form of operating system slimming. Operating system slimming is about reducing the resource usage of an operating system. Resources commonly considered are hard disk space, RAM, CPU time, processes and services running, startup and shutdown time.
One of the better pages on this topic, if not the best one, is Slimming Down Windows XP: The Complete Guide.
Of special interest there is the Windows XP Services Companion, which explains for most if not all Windows XP services why it should or should not be disabled.