The other answers cover the 2 most common approaches, Xinclude and XML external entities. Microsoft has a really great writeup on why one should prefer Xinclude, as well as several example implementations. I've quoted the comparison below:
Per http://msdn.microsoft.com/en-us/library/aa302291.aspx
Why XInclude?
The first question one may ask is "Why use XInclude instead of XML external entities?" The answer is that XML external entities have a number of well-known limitations and inconvenient implications, which effectively prevent them from being a general-purpose inclusion facility. Specifically:
- An XML external entity cannot be a full-blown independent XML document—neither standalone XML declaration nor Doctype declaration is allowed. That effectively means an XML external entity itself cannot include other external entities.
- An XML external entity must be well formed XML (not so bad at first glance, but imagine you want to include sample C# code into your XML document).
- Failure to load an external entity is a fatal error; any recovery is strictly forbidden.
- Only the whole external entity may be included, there is no way to include only a portion of a document. -External entities must be declared in a DTD or an internal subset. This opens a Pandora's Box full of implications, such as the fact that the document element must be named in Doctype declaration and that validating readers may require that the full content model of the document be defined in DTD among others.
The deficiencies of using XML external entities as an inclusion mechanism have been known for some time and in fact spawned the submission of the XML Inclusion Proposal to the W3C in 1999 by Microsoft and IBM. The proposal defined a processing model and syntax for a general-purpose XML inclusion facility.
Four years later, version 1.0 of the XML Inclusions, also known as Xinclude, is a Candidate Recommendation, which means that the W3C believes that it has been widely reviewed and satisfies the basic technical problems it set out to solve, but is not yet a full recommendation.
Another good site which provides a variety of example implementations is https://www.xml.com/pub/a/2002/07/31/xinclude.html. Below is a common use case example from their site:
<book xmlns:xi="http://www.w3.org/2001/XInclude">
<title>The Wit and Wisdom of George W. Bush</title>
<xi:include href="malapropisms.xml"/>
<xi:include href="mispronunciations.xml"/>
<xi:include href="madeupwords.xml"/>
</book>