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From the book About XML Rules

About XML Rules

XML rules are a great new feature in InDesign. Haven’t heard of them? That’s understandable—they’re a scripting-only feature. XML rules work in a fashion similar to XSLT—when a rule finds an XML element that matches the thing it’s looking for, it does something. XSLT changes the output; XML rules execute a script.

We won’t get into the details of how XML rules work here. For one thing, there’s really no way for us to provide a generic example, because XML rules (like XSLT) literally depend on the structure of your XML. For another, Ole’s already done that in the InDesign CS4 Scripting Guide.

But the important thing you need to know about XML rules is that you can create (or have someone create) XML rules that can process the XML in your InDesign file in an unlimited variety of ways. XML rules can create or remove layout elements, apply formatting, or change the structure of the XML in your document. While you could do all of this using scripting in earlier versions of InDesign, XML rules provide significant (like, several orders of magnitude) improvement in performance.

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