My problem mentioned here is now solved. Got an advice from a colleague and found few links here on the Internet.
The key to the issue is to add NetBIOS to your connection. If you are using hardwired conection with your hub in LAN properties click Install>Protocol>Add>NetBIOS>OK. Your firewall may still be in your way blocking you. In my case it's Windows Live OneCare. I had to open that in "View or change settings" click firewall>advanced settings>Advanced there are few radio buttons one of them being "share them with all computers (even those on the Internet)" then click OK.
It would be safer of course while transferring files between computers via a hub/router you switch off your ADSL modem preventing any access from outside.