If your source file is an XML file, you can have any kind of XML file you want, you can even verify it against an XML Schema or DTD (take your pick) should you want to.

You can make a range of XSL-Templates to convert the XML file you have into another XML file. The Transformation always gives you a well-formed new XML (or XHTML) file. You can have a range of XSL-Templates for a range of devices, web browser, WAP phone, another server. If you want you can also use XSL-FO and generate a PDF file should you wish.

Should you want you can pipeline one XML document into one round of templating after another, as each step always generated well-formed XML.

XML, XSL-T, XSL-FO, DTD, XML-Schemas are all public standards, you can use a range of tools, on different operating systems, in different languages, and most of the time things behave the way you expect them to. Using one XML file and one XSL-template I can generate one HTML file on my Linux box and NT box, using Saxon, Xalan, LibXSLT or even MS-XML, it's pretty predictable.

One of the key strengths of XML is that the coding and the content/templates are kept apart. By using XML, you can use any code you want, and any content and it works! As your team gets bigger it means that the coders code and the mark-up people mark-up.

There is a good thread on templating versus XSL-T here: XSLT vs Templating? where people put many sound arguments for both sides. Matts in particular as a strong advocate of XML says many things that I could add here.

I'm not saying that XML is the best solution, just that it's one solution, and for larger more complex applications, it's focus on flexible structures, and it's wide scale use, does make it the tool of choice.

Update: Typos fixed, and XSLT link added