As far as dhtmlxFolders can display any kind of data which can be presented through HTML, XML can contain any data and its format can be of any kind. But if you use built-in or third party types you have to follow XML format required by those types. In appendix you can find a summary table of available types and corresponding XML format.
You need to understand that xml structure should be defined based not only on exact necessities of the type (what information is shown by each item), but also on some additional purposes - like ordering by different property values (even if these properties are invisible), showing information out of dhtmlxFolders object (like showing additional information for selected item). Also XML structure can be defined taking into account the possible changing of type without reloading the data. For example when files list in file browser is shown as icons or as thumbnails.
Talking about XML we do not mean only static xml files. In most cases not static content is used. XML content can be created dynamically based on database data or file system (if you need to display real file system structure) using any server-side programming language. Common requirements for xml produced by server side language:
<?php if ( stristr($_SERVER["HTTP_ACCEPT"],"application/xhtml+xml") ) { header("Content-type: application/xhtml+xml"); } else { header("Content-type: text/xml"); } echo("<?xml version=\"1.0\" encoding=\"iso-8859-1\"?>\n"); ?>