InfoPath Dev

There is a form to a sharepoint website that appears to have an xml data connection. However, I have no clue what a xml file is nor how to make this sort of connection. How can I do the same with my own form for a sharepoint list form?

It looks from your screenshot like that XML file is a form resource. Under the data tab in the ribbon in the designer you can click on the Resources button to see any XML or other resource files. There will be a button you can click to export the files so you can look at them. XML files can be created in any text editor. There's lots of information online about what valid XML looks like - here's one helpful resource: http://www.cs.uccs.edu/~cs526/jwsdp/docs/tutorial/doc/JAXPSAX3.html