When does one need a crossover cable? I have two machines in front of me connected directly (no switch/hub/etc) via a standard ethernet cable; I gave one an IP of 192.168.123.1, the other .2, and they are communicating just fine... is it just that if I want full duplex (ie, 100mbps in both directions for a 100mbps cable at the same time) I need a crossover cable?

A lot of modern ethernet devices have automatic switches in to flick between crossover and standard. The fact that the machines are communicating at all means that they probably do not require a crossover cable.

10/100 ethernet only requires 4 of the 8 cores, so the other 4 are redundant, and in some systems are used to double up cables. With the advent of Gigabit LAN, these cores became used.

However, in a standard crossover cable for 10/100 (which is what you have), the extra 4 cores are not crossed over, so if you need a crossover cable for a Gigabit LAN (which is not what you said you had), then you would need a proper Gigabit crossover cable. For further information, have a look here:

http://en.wikipedia.org/wiki/Ethernet_crossover_cable

Hope this helps

What fuzzyworm said is correct.

Also, see the Wikipedia article on "Medium dependent interface" for more info.

This is independent (and usually prior to) speed and duplex negotiation. A direct cable connection as you have may, under certain circumstances, actually hinder those negotiations!

Simple rule of thumb on whether you need a crossover cable or not is as follows:
Like devices require a crossover cable and unlike devices require a straight through cable.

Examples:

Switch <----> Switch (crossover cable)
PC <----> PC (crossover cable)
Switch <----> PC (straight through cable)
Router <----> Switch (crossover cable)

As the previous posters stated; a lot of newer devices will automagically compensate for having the wrong type of cable.

Little more info on ethernet straight and crossover cables.
And other cables too.

http://www.hardwarebook.info/
http://www.hardwarebook.info/Etherne..._Straight_Thru
http://www.hardwarebook.info/Etherne...e-T4_Crossover