A Flange Window and Existing Siding
My new windows were Marvin double-hungs with a nailing flange, which some consider to be a "new work" window, meaning that at installation time, there's no siding on the house. All the info I found on installing flange windows assumed no siding on the house, so it took a while to figure out how to deal with my situation of existing siding.
What I did was to cut the siding back far enough to accomodate the window's nailing flange, an inch and a half or so. To do that, set your circular saw blade depth to match the thickness of the siding boards and have at it. You could nail a straight board to the siding to serve as a fence for the saw so your cut is straight, though this edge will be covered by the window trim, making a perfectly straight cut line unnecessary.
During flashing, you need to try to get new flashing material between the existing building wrap and the siding. That way, any water that manages to get under the trim will be kept out of the building by the existing wrap. To do this, you need to pry the siding up a bit along the edges where you cut so you can slip the flashing material in. On an old house with the original, flimsy and deteriorating oil or tar paper, this can be frustrating. You'll need to remove any nails along the edge which may prevent the flange material from slipping far enough in under the siding.