It depends on
a. whether or not you have a fax modem (obviously)
b. which version of Word and WIndows you are using
c. what kind of thing you are trying to fax.
As long as you have a fax modem, you should not need to use an Internet
faxing service to send faxes, but /merging/ to fax using a faxmodem is
either difficult to set up or impossible just using the software available
in Word and Windows on Win2K, WinXP, or with Word 2003. If you just want to
send a single document to fax, you should be able to set up "Microsoft Fax"
on both Windows 2K and Windows XP - it comes with Windows and you can
install it from Control Panel|Add or remove programs|Add/remove windows
components. Then you print your document to the "Microsoft Fax" printer.