About the iTunes Library.itl file
This file is a database of the songs in your library and the playlists you've created. Some song-specific data is saved in this file. If you delete the file, iTunes creates a new, empty copy when you open the application, but any playlists, song ratings, comments, or other information you created is lost. The iTunes Library file is only used by iTunes, and is the only one backed up by Time Machine on OS X.
About the iTunes Library.xml file
This file contains some (but not all) of the same information stored in the iTunes Library file. The purpose of the iTunes Library.xml file is to make your music and playlists available to other applications on your computer. In Mac OS X other iLife applications (like iPhoto, iDVD, and iMovie) use this file to make it easier for you to add music from your iTunes library to your projects.
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