I'm new to Linux. I'm looking to (dual boot) install it on my system that currently has only Win XP. I'm not sure which distribution I should install - But that's another story. My question is do I need to install distribution specific application software. i.e. If I end up installing Fedora Core 3 on my system, and I want to later install xmms, yahoo msnger and Firefox etc. Do I need to look for versions of those software that are meant for FC3 or just for Linux?

You *should* install packages made for your distro. They are most likely to work correctly with the fewest problems.

Sometimes, you have to use a *wild* package, though.

You must install the software in a form packaged for your distribution. Most distributions have a central repository of packages. On debian or ubuntu for example (since that's what I know) you have more than 10'000 packages that you can install with just one command in a terminal:
aptitude install mozilla-firefox

This will install firefox. You can also use graphical programs to do that if you don't like typing commands in a terminal. Same for xmms. For Yahoo messenger just choose an approriate program such as gaim.

Installing a software that has not been package for your distribution is harder, but then the vendor usually provides an easy way to do it (for commercial software that is).