XML, or eXtensible Markup Language, is a language similar to HTML which is used to store and transfer data. It is self-descripting, allowing developers to declare their own tags for the data. It can also be styled using CSS, creating a list of data displayed on a page.
The main difference between viewing an HTML page and an XML page, is that the HTML page will render the content of the file as plain text, but the XML page will display the tags as well as the data, unless styled with CSS.
I use XML in the setup of Magento websites, which use it to store details of the setup of the website.