There are three primary ways XML documents are transformed into other formats, such as HTML, with an XSL style sheet:
The XML document and associated style sheet are both served to the client (Web browser), which then transforms the document as specified by the style sheet and presents it to the user.
The server applies an XSL style sheet to an XML document to transform it to some other format (generally HTML) and sends the transformed document to the client (Web browser).
A third program transforms the original XML document into some other format (often HTML) before the document is placed on the server. Both server and client only deal with the post-transform document.