About XML and XML Schema
A WSDL file is published in the form of an XML document instance. Document or Literal is required as part of the WS-I interoperability standard that forms the basis of modern Web service usage, where:
Document means that the payload for an operation, however complex, must be defined in a single XML element.
Literal means that the definition of that element must be described by an XML Schema embedded in the WSDL file.
When using Document/Literal formatting, the WSDL file will contain an XML Schema definition that defines all messages and data types that will be used for a particular service. The payload itself will consist entirely of XML data structures.