XML, or eXtensible Markup Language, is basically a way to have structured data in a text document.  Once you have structured data you can do quite a bit with it.

One of the most well know uses of XML is to display data in HTML format using an XSL transformation.

XML has been largely accepted by the web community, and many spin-offs of XML have been created.  It seems like you can't go a day without reading about a new standard that has been released using XML as the backbone.

The term "Web Services" once had multiple meanings.  There were many different types of web services.  Now, when you hear someone talk about web services, you automatically assume that they are talking about XML web services.