Backup in PSE8 stores a *.xml file not a *.PSD file. WHY?

I have thousands of files and am new to PSE8.  I have used PSE4, etc for a long time.  Everything in my PSE4 catalogs moved to PSE8 just fine. (Using XP).  HOWEVER when I now backup my catalogs to an external HDD and then examine the catalog all the files are *.xml files.  Those *.xml files look like some kind of programming language.  What has happened?  In order to get a FULL USABLE backup of my pics do I have to copy them all to an external Hard drive so that I could carry them to another computer with PSE8.

Thanks for the elucidation.

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