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It is an xml file that is formatted in a standard manner. If you take a look at a feed you'll notice it looks a lot like html markup. But the technical stuff isn't as important as to what you can do with it.
If some site publishes a feed you can take that feed and run it through a rss parser and have the content in the feed appear on your webpage. That's why so many sponsor programs are touting their RSS feeds.
Frankly it's a neat tool that can be implemented to make money but like anything that is widely discussed the profitability has decreased a lot since its inception.
-A
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