An XSD file stands for XML Schema Definition. It gives a structure for the XML file. It means it decides the elements that the XML should have and in what order and what properties should be present. Without an XSD file associated with XML, the XML can have any tags, any attributes, and any elements.
Xsd.exe tool converts the files to XSD format. During Serialization of C# code, the classes are converted to XSD compliant format by xsd.exe.