A sector type defines the behavioral properties of a sector. All sectors set to a certain type share the same behavior. XG allows defining properties related to the visual appearance of the sector (for instance, light color) and gameplay functionality (for instance, damaging the player).
An XG sector is a normal Doom sector whose type is an XG sector type. XG sectors have special physics processing for wind, customized gravity and friction. Each sector has a number of chains that are used to define extended functionality. Note that sector_chains refer to line types, so anything that can be achieved with line types can also be done with sectors. For instance, if you want a sector to damage all the things touching its floor, you would set the sector type's floor chain to a line type that deals damage.
The properties of XG sector types are documented in the Sector Type definition.