What this sentence means is that an XML document which follows the rules in this specification is a conforming SGML document. However, this specification does not have a normative reference to the SGML standard, and it should not be necessary to read or understand that document in order to construct and use XML documents and software. This is a benefit, since the SGML standard is a large document and difficult to read. This should not be seen as a criticism of SGML, since that standard is trying to achieve much higher, more complex, and more generalized goals than XML is.
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