Basically a more general, formal, and strict version of HTML which is a subset of SGML. XHTML is the (new) XML compliant version of HTML. It uses the same syntax of tags deliniated by "<" and ">" but has a more strict structure. For example, all elements MUST be closed, so every <P> must have a </P> (and not a </p> if the start was <P>; it is case sensitive) and <option selected> must be <option selected="selected"> (every attribute must have a value in quotes). XML is also used as the basis of many other languages, including XPS, RSS, Atom, SOAP...
The major advantage of XML is that the parser for it can be seperated from the language and many tools are available to browse, validate, etc... so developers don't need to recreate those for every new language.
See also:
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