Xbee modules provide a very simple way to add a wireless capability to communications on Arduino. Essentially they let you work in exactly the same way as a direct serial connection between two boards – albeit wirelessly.
The easiest way to connect an Xbee to your Arduino, is to use the Arduino Wireless Shield.
It’s possible to connect Xbee’s without a shield – but given the fact that they don’t have the (standard) breadboard 0.1″ pin-pitch, this requires a special breakout board, or some custom hardware. If you’re using an Arduino, I think the shields are definitely the best way to go (and they’re pretty inexpensive).
There are a number of different types of XBee – the most notable distinction is between the original, “series 1” devices (directly using the 802.15.4 wireless protocol) and the “series 2”, ZNet 2.5 (or ZB) modules: which add an additional communications layer over the base-standard. Series 1 and series 2 devices are incompatible with each other (and cannot communicate with each other) – but they are pin compatible with each other: so for point-to-point applications, it’s possible to swap out S1 devices with S2 devices (providing you exchange both ends of the communication).