Architecting and designing : XML schema design : XML history and topics of interest : What is an XML document? : What is an XML instance?
  
What is an XML instance?
An XML Instance document is a file (generally has an .xml extension) that contains the information, or data, of what you are trying to describe with your schema. The instance document will refer to the schema design (DTD, BizTalk) that provides its structure. The schema design file must be present for the instance document to validate and open in a browser.
See also
What is an XML document?