XML external entity injection targets applications that parse XML. The XML standard allows documents to define entities, including external ones that reference a file or URL, and if the parser resolves those external entities and the application returns the result, an attacker can define an entity that points at a server file and have its contents reflected back.
The most common outcome is reading local files from the server, but XXE can also be used for server-side request forgery, reaching internal systems the same way. The root cause is an XML parser configured to resolve external entities on untrusted input, which most modern parsers can and should disable.