Are you familiar with IE's ViewLink or Element behaviors?
XBL is basically the same idea, but implemented more intelligently imho.
Basically, a binding is applied through the moz-CSS property, -moz-binding, or through a method of the DocumentXBL interface, addBinding (not sure if that method is currently broken though).
A binding declares several things:
1. Anonymous content
These are nodes generated by the binding, and inserted underneath the bound element. They are invisible to the page's DOM. You can define insertion points via <children/> inside <content>. The concept of anonymous content is like IE's ViewLink content, and can be though of:
<div>
some children
</div>
When bound, if the <content> looks like <button><children/></button, you effectively have rendered:
<div>
<button>some children</button>
</div>
But in the page's DOM:
refToDiv.firstChild.nodeValue == 'some children';
The button element doesn't exist. You need to use document.getAnonymousNodes(element)
Which returns a NodeList of the anonymous nodes in element.
Anyway, after <content>, and inside the <implementation> element, you have two related nodes:
<constructor>
</constructor>
and
<destructor>
</destructor>
(I personally haven't used <destructor>, but am pretty sure it functions).
All the Javascript code inside of <constructor> is executed when the element is bound, i.e. kind of like the onload event, but this is specific to the successful binding. It replaced the event onbindingattached.
<destructor> is the opposite, and replaced onbindingdetached.
Also in the <implementation>, you have 0 or more <property> elements. These define properties the bound element may have. You also have <method> elements, which define the methods the element has.
Finally, a sibling to <implementation>, you have <handlers>, which can have <handler> elements, and applies event handlers to the element.
Read that link to the XULPlanet tutorial for more info, and if you want to see a working binding (the one I am using for the LayerEmu project), take a look at:
http://layeremu.mozdev.org/files/LayerEmu.xml
Ignore the scary trilicense at the top, and don't be turned off by the monstrous <constructor> - it actually makes a lot of sense once you get used to XBL. :)