Extensible means you use tags written especially for your application. Invent them yourself or use someone else's.
An element is just a tag with some extra rules.
Elements can have attributes -- pieces of information in them.
Food for thought: elements vs. attributes
An entity is a piece of data -- big or small -- with a name.
Internal documentation is useful.
Tell the XML processor what not to process.
Prevent conflicts in case two applications choose the same tag name.