What is a crossdomain.xml file?

A crossdomain.xml file is a file that usually sits in the root folder of your webserver.  This file is basically an opt-in to allow access to your data from outside your web domain.  This is the crossdomain bit - you have to actively give permission for someone to "trespass".

Many web applications require access to data from somewhere different than where the app file originates.  The crossdomain.xml file gives these web apps permission.

Things that may require crossdomain.xml access:

• Flash
• SWF
• Flex
• Adobe pdf reader
• Silverlight

Example of a crossdomain.xml file:
This following example of a crossdomain file basically allows no access, it's the strictest policy. 

<?xml version="1.0"?>
<!DOCTYPE cross-domain-policy SYSTEM "http://www.adobe.com/xml/dtds/cross-domain-policy.dtd">
<cross-domain-policy>
    <site-control permitted-cross-domain-policies="none"/>
</cross-domain-policy>


If you want to allow access then it's important to learn the sercurity implications so have a read of the following articles before allowing access to your web server:
www.adobe.com/devnet/articles/crossdomain_policy_file_spec.html
curtismorley.com/2007/09/01/flash-flex-tutorial-how-to-create-a-crossdomainxml-file
jeremiahgrossman.blogspot.com/2008/05/crossdomainxml-invites-cross-site

Other web server files that you may be interested in are:

how-to-make-robotstxt-file
htaccess-modrewrite-and-how-to-rewrite
how-to-generate-sitemaps
how-to-build-your-own-custom-404-pages

What is a crossdomain.xml file?