It is a file that you create manualy or is dynamic generated and contains URL information for search engines. The URL list is used as a hint for search engines where to find pages on your website.
Some websites are search driven and that means that the user must search on the website to be able to reach all webpages. And because search engines often crawl a website they need help to find all these pages that it doesn´t know exist.
Exmaple of sitemap.XML: