XML is used to aid the exchange of data. It makes it possible to define data in a clear way.
Both the sending and the receiving party will use XML to understand the kind of data that's been sent. By using XML everybody knows that the same interpretation of the data is used
EDI (Electronic Data Interchange) has been for several years the way to exchange data between businesses.
EDI is expensive, it uses a dedicated communication infrastructure. And the definitions used are far from flexible.
XML is a good replacement for EDI. It uses the Internet for the data exchange. And it's very flexible.
XML makes communication easy. It's a great tool for transactions between businesses.
But it has much more possibilities.
You can define other languages with XML. A good example is WML (Wireless Markup Language), the language used in WAPcommunications.
WML is just an XML dialect.