So, what is the difference between PDF and XPS? I know the storage format of XPS is based on XML and ZIP technology, which makes the format head-over-heels more "open" than PDF as well as more approachable for us geeks who like to hack documents. For that reason alone, I'm excited about XPS. But that provides nothing for end users, so the question remains... Why do we need a new format?
One thing PDF has today that XPS doesn't is some dynamic capabilities. Of course, this is just a matter of time. Being based on WPF opens XPS to a world of possibilities. On the other hand, I've seen talk about XPS being "safe" because it doesn't contain scripts or macros. I hope this isn't the position Microsoft is taking, but you never know. Either way, I think this is something that has to be added to truly compete with PDF. As-is, you can create forms with XPS, for instance, but have no way to fill them out electronically. Actually, I can see how one might achieve this somewhat easily. Hmmm... There's definitely an opportunity here.
Versioning is another aspect that's been quietly touted. Apparently, Adobe frequently introduces breaking changes into new releases. These have historically broken both software and hardware built to the older spec. I'm not sure how they've gotten away with this for so long, but apparently XPS has an answer to the problem. This is huge for hardware and software vendors.
The last difference I'm aware of is with images. PDFs embed images in a proprietary, lossy format. XPS includes images as they are, in all their high-def glory. Oh yeah, did I mention high-def? As I understand it, XPS has support for HD Photo and just provides all-around better image quality. I know I've noticed this with a few presentations I've saved in both formats.
In my opinion, XPS seems like a great power user upgrade and a decent end user upgrade; but is it really worth the effort Microsoft has ut into it? Doubtful... At least not at this time. I'll be more excited to see v2, which is typically where Microsoft products start to shine.