I have a Windows 2003 server that has file shares. If a windows XP client deletes a file on that share. Does it go to any sort of 'recycle bin' on the server or client?
No, not by design. Files deleted from a network share are just gone without using something like Shadow Copy. See this question for some more ideas on how to provide this type of functionality.
You are listing 'recovery' as a tag, so I guess this question is for recovery of data that has been deleted by accident. It is not practical in most cases to provide a 'recycle-bin'-functionality.
Instead I suggest you look into shadow copies for the server volume to provide a convenient method to access data that has been modified or deleted.
Here's an article on Volume Shadow Copy, or "Previous Versions", as it is labelled in the Explorer UI. Should be enough to get you started.