Here's a little more info directly from the Google blog.
Q: Can I just submit the site map that my webmaster made of my site? I don't get this whole XML thing.
A:There's a difference between a (usually HTML) site map built to help humans navigate around your site, and an XML Sitemap built for search engines. Both of them are useful, and it's great to have both. A site map on your domain can also help search engines find your content (since crawlers can follow the links on the page). However, if you submit an HTML site map in place of a Sitemap, Webmaster Tools will report an error because an HTML page isn't one of our recognized Sitemap formats. Also, if you create an XML Sitemap, you'll be able to give us more information than you can with an HTML site map (which is just a collection of links). Learn more about supported Sitemap formats.
Q: Which Sitemap format is the best?
A: We recommend the XML Sitemap protocol as defined by sitemaps.org. XML Sitemaps have the advantage of being upgradeable: you can start simple if you want (by just listing your URLs), but—unlike a text file Sitemap—you can easily upgrade an XML Sitemap later on to include more metadata. XML Sitemaps are also more comprehensive than an Atom or RSS feed submitted as a Sitemap, since feeds usually only list your most recent URLs (rather than all the URLs you want search engines to know about).
Source: Official Google Webmaster Central Blog: Sitemaps FAQs