XML-RPC is described fully in Dave Winer's official specification. If you're curious, go ahead and take a look—it's a quick and straight-forward read.
On the wire, XML-RPC values are encoded as XML:
<methodCall> <methodName>sample.sumAndDifference</methodName> <params> <param><value><int>5</int></value></param> <param><value><int>3</int></value></param> </params> </methodCall>
This is verbose, but compresses readily. It's also faster than you might expect—according to measurements by Rick Blair, a round-trip XML-RPC call takes 3 milliseconds using Hannes Wallnöfer's Java implementation.