This makes it available to special blog reader software and as a dynamic content feed on other sites.
I don't know that much about this stuff, it is all pretty new to me, but I believe that in my case Blogger basically puts the content of my blog into XML format. The DTD that is used is in accordance to an industry standard (RSS, Atom etc.) that software and other sites can read. Please correct me if I am wrong.
If you have special software installed you guys can read the latest content from several blogs, news sources etc. in the same place. Sort of like the good old internet news if you know what that is. Cool if you read lots of blogs since you don't have to load up all the individual sites to manually check for new content. Personally I think it is a lot more fun to visit the sites themselves though, but I can of course see the value of storing content in xml format in addition to html/css. XML is a lot more versatile and flexible.