According to the XML specification (
http://www.w3.org/TR/1998/REC-xml-19980210#sec-intro): "A software module called an XML processor is used to read XML documents and provide access to their content and structure. It is assumed that an XML processor is doing its work on behalf of another module, called the application."
This XML processor is more commonly called parser. Basically an XML parser parses (creates internally without output, just remains in RAM) an XML file into a result-tree so that it can be used by others. For instance, with this result-tree, you can apply XSL to output HTML, another XML, voiceXML etc.