What is XHTML?
eXtensible Hypertext Markup Language, a type of HTML that is compatible with XML. HTML is not strict enough to be compatible with XML, so XHTML was made to bridge the gap.
XHTML is a standard and pages written in XHTML should validate.
Why are standards and XHTML important?
Would you build a car with concrete wheels for a rubber highway? Then why should browser developers (IE) get to create their own standards?
Web developers have enough trouble battling with the various browser's interpretation of HTML code. As a developer when your code is written in valid XHTML you can take a stand and say here is valid (and validated) code that should display as expected.
Having validated code that also takes advantage of CSS is also a great way to ensure accessibility.