Websites aren't really coded in XML. XML is a language that is used to transmit database information between different mediums. For example, if you want to display the latest DaniWeb threads on your site, constantly updated, you would use an XML page of our latest info (i.e. www.daniweb.com/techtalkforums/external.php) You would then use HTML/XHTML to design a frontend for displaying this information.
XHTML is HTML ala XML. If developing a new site, I would use XHTML, like this site is. There is more support for the latest browsers and it is extremely CSS friendly. There are two versions - XHTML strict and XHTML transitional. XHTML transitional is a more leinient version that supports many HTML tags. XHTML strict is composed entirely of div tags and CSS. The idea is that the layout and design of a site should be kept entirely separate from a site's content. Therefore, all that should appear on the page are div tags, span tags, and text. CSS defines the entire layout of everything.
The W3C web site lists XHTML 1.1 as the latest HTML standard. I guess it depends on how up to date you want to be. I am not convinced that earlier browsers still used by a lot of people will necessarily display pages written in XHTML 1.1 properly so I am currently using XHTML 1.0 which is almost identical to the previous version (HTML 4.0) except for the minimal changes necessary to make it XML compliant.