XML (Extensible Markup Language) data file that uses tags to define objects and object attributes; formatted much like an HTML document, but uses custom tags to define objects and the data within each object; can be thought of as a text-based database.
XML files have become a standard way of storing and transferring data between programs and over the Internet; because they are formatted as text documents, they can be edited by a basic text editor.
A more broader explanation of XML files can be found at Wikipedia.
To open a XML file, you do not require any special software, just run notepad and open the file using the file open menu.
You can also view XML files in browsers such as Internet explorer.