XAML (pronounced zammel) is an acronym for eXtensible Application Markup Language, is Microsoft's XML-based language for creating a rich GUI, or graphical user interface. XAML supports both vector and bitmap types of graphics, as well as rich text and multimedia files. XAML was introduced in 2003 as the language behind the Windows Presentation Foundation, which is Microsoft's GUI design tool for the upcoming Windows Vista operating system. 

XAML files can be produced in either Visual Studio, Microsoft's development tool for the .NET Framework, or in Microsoft's Expression toolset for designers, before exporting them to the Windows Presentation Foundation. This allows designers, who focus on the front end of an application, and developers, who focus on the code that defines the front end, to work from the same code base, which improves productivity.
XAML documents are strict XML. Every tag (for example, StackPanel or Label) and attribute (for example, Margin or FontSize) must correspond to a valid .NET type or property. If a tag has the wrong case or an unknown attribute is used, the resulting XAML won’t work.
XAML could even be used on other platforms to represent non-.NET objects.

Subset of XAML:

WPF XAML includes the elements that describe WPF content, such as vector graphics, controls, and documents. It’s the most significant application of XAML.
XPS XAML is the part of WPF XAML that defines an XML representation for formatted electronic documents.
Silverlight XAML is a subset of WPF XAML that’s intended for Silverlight applications.
WF XAML includes the elements that describe Windows Workflow Foundation (WF) content.

Sample code of XAML

<Page
xmlns="http://schemas.microsoft.com/winfx/2006/xaml/presentation">
<StackPanel>
<Label>MindStick</Label>
</StackPanel>
</Page>