I understand XML and XSLT. To run jsp and servlet we install TomCat and do required configurations etc. My question is how do we run XML files what all I have to run in my local system.
Your Java standard edition 1.4 or 1.5 should have all the XML libraries you need. You should be able to find good tutorials online, just search for "java xml tutorial' Bill
XML is not something you "run". It is just a plain text file to represent data in a certain format. once you have a file, you write applications to interact with that file when you "run" the application.