You could also run the vcvars32.bat file from the directory C:\Program Files\Microsoft Visual Studio 8\VC\bin (this is in your path) prior to your cl command.
Like this:
C:\Users\nathan\Desktop>vcvars32
C:\Users\nathan\Desktop>cl minimal.c
vcvars32 calls C:\Program Files\Microsoft Visual Studio 8\Common7\Tools\vsvars32.bat which sets up the required environment for compiling and linking.
The environment variables are INCLUDE, LIB, and PATH.
The compiler looks for header files in the INCLUDE path during compile, and libraries are fetched from the LIB path during link.