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I like to think of XML as 'database-markup-language' since that is essentially what it is. An XML schema or doctype definition is the equivalent of a database structure (the tables/columns and relationships). The XML file itself is a chunk of data that fits that schema. XML files can be displayed directly using a kind of XML style sheet although that's not really that useful. XML files are usually used as a format for data-interchange, especially between different companies since they just have to agree on a schema.
XML and all the associated extras like XSLT, XPath and XQuery etc were announced as the solution to all database problems ever, when in fact they are not really. Lots of database systems now provide support for XML import/export, however making queries on XML data can be a lot slower than a standard RDBMS like MySQL or SQL server having good indexes.
XML definitely has its uses - I've seen it used for config files, files saved from an application (MS Office is supposedly going to use an XML format in the future), CAD data files among other things. There are a number of standardised schema available for different uses such as SVG for graphics, MathML for mathematical formulae, MusicML for sheet music, DocBook for general text documents etc etc...
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