the project's model is described by xml files. The "Show XML" button shows you the xml about the current element, for eample Site View, Page and so on.
The "Show Layout XML" button shows you the xml related to the elements that will be managed in the Grid.
If you want to know more about the Layout xml structure you can refer to this article
In this case the article describes the Cell structure but the logic can be applied for the other elements.