XPS (XML Paper Specification) is an electronic paper format and is competing with Adobes PDF. Since Microsoft is forced to withdraw the function of publishing to PDF from Office 2007 the XPS will be more widely adopted. Read more about it here; Adobe PDF vs Microsoft XPS.
Windows Vista will include a XPS reader, but if you already now get XPS files you can download either the WinFX runtime components or the XPS Essentials Pack (beta).
Here is the Windows Vista product guide in XPS format, 12 MB, if you feel like trying it out.