XAudio2 is Microsoft's new(ish) low-level game audio API for both Windows XP/Vista and Xbox 360. The xWMA audio format is a stripped down form of WMA suitable for use in games. It has better compression ratios and sound quality than either ADPCM or XMA, at the cost of higher CPU consumption. Support for xWMA on Windows has just been added to XAudio2 and XACT3 in the August release of the DirectX SDK, available at http://download.microsoft.com/download/8/d/1/8d1e0a50-45c4-4049-b0df-7166e71aa7ad/DXSDK_Aug08.exe. For Xbox 360 development, xWMA support has also been added to the August XDK release, but it is only available to registered Xbox 360 developers; it is not available in XNA Game Studio Express.
You can't use arbitrary existing WMA files in XAudio2/XACT3. You have to create xWMA files from raw PCM (WAV) files using one of the encoder tools we provide with the DXSDK/XDK: either xwmaencode.exe, or the built-in encoding functionality in xWMA3.
Hope that clears everything up!