To initiate a chat, just double-click a friend's name in your friends list, or click the chat bubble icon at the bottom of your Xfire client. You can also right click someone's name and select "Send message".
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The basic Xfire chat window has typing and text areas, a typing notification message, and a button to send your messages (or just press enter.) It also has an Xfire Info Pane to give you more info about what game your friend is playing.
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If you have Xfire In-Game enabled, messages you receive will come straight into your game - no more Alt-Tab to chat. You can enable it on from the Tools -> Options menu in Xfire. You can also change the binding that will bring up Xfire In-Game when playing.
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When someone sends you a message, a small notification will appear in the lower right corner, showing who messaged you and the first few lines of text. Just press the key binding (default is Scroll Lock + X) to respond.
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Type back to your friend while your game continues behind. If you're chatting with multiple people, use the Page Up/Page down keys to switch between messages. At any time, you can press the F2 key to bring up the menu and see your friends list, game options, etc.
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The options menu allows you to change the position, size, and transparency of Xfire In-Game windows. You can also enable Continuous Mode, which makes the In-Game alert display a continuous flow of text.