The package schema is consumed by Setup.exe, a stub program generated by the MS Build bootstrapping task that contains little hard-coded logic of its own. The schema drives every aspect of the installation process.
InstallChecks the tests that setup.exe should perform for the existence of a given package. PackageFiles lists all of the packages that the setup process might have to install, should a given test fail. Each Command entry under Commands executes one of the tests described by InstallChecks, and specifies which PackageFile to run should the test fail. You can use the Strings element to localize product names and error messages, so that you can use one single installation binary to install your application for any number of languages.