You should read some of the more general introductions to XML. Wikipedia might be a good start. These days with fast computers and connections, but expensive software development, we choose to represent data in XML so that common software tools can be used to operate on them. XML is a text format for ease of interchange and ease of development.
For those that want speed, you can zip XML and they get really compact. This is what Microsoft's .docx format does. The W3C is also working on a compression scheme that is specific to XML that will probably do even better than zip compression. What is cool about it is that all XML-based file formats will take advantage of it. All XML tools will be updated to deal with the compression/decompression and will work on all those formats.