In my last post, I talked a little about XSLT - how it can be used to mix data from an XML file with HTML markup, thus producing a web page presentation for that data. This is fundamentally how the Data View Web Part works. When the Data View executes within an ASPX page, it first fetches the data as XML, be it from SQL, a web service or a SharePoint list. That query is defined in the <dvwp:DataQuery> section of the markup. Next, the Data View executes the embedded XSLT markup (contained within <dvwp:XSL> tag) against that returned XML, which produces an HTML stream that is returned as the rendered output of the web part.
Of course, there are other server-side smarts built into the Data View, e.g. support for part to part connections, parameterization, etc, but the XSL transform is the heart of the of the feature.
Next up: the real magic of the data view - wysiwyg XSLT generation in FrontPage.