In simple terms XML is a common way to transfer structured data (a table of data) between two sites/servers. With XML an ASP site can receive and send data to a JAVA site without any complicated configurations (relatively speaking here).
An example of XML use is where I call a site (ie a web service) and I tell that site I want a list of all their cars in blue, the site will then send me this list along with the price, make, and model of the cars in XML format. I will then take this XML formatted list and either display it on my site or insert it into my own databases.
Now you want to know how you can use this in your site and the answer is most likely you have no need for it. XML is huge in the corporate world where even in the same company you need to deal with different environments, but for a personal web site or small company site it does not have a whole lot of use.