Are you now saying that you do not want to save the raw files, but want to convert to a Jpeg or Tiff files?.
If so when you have the photo you want to save edited, goto "Save As" under "File Menu" In the box that pops up enter your file name and below that you will see a tab labled "Format" click on the little arrow to the right. You will now be presented with a list of various file formats select jpeg or Tiff and save.
When you have finished applying adjustments in CameraRaw click the Open Image button at the bottom right. You can then choose Save as from the file menu and choose whatever type of file you want. It will not overwrite the Raw file. Personally I use .tif, but what you use is up to you.
I also use Tiff, but then make a jpeg copy for internet use.
My full size uncropped Tiffs come out at approx 65Mb whereas a maximum quality uncropped Jpeg would be around 12Mb.
As Ventanas says the choice is yours.
With a Tiff file you can re-edit without any loss in quality, but doing this with Jpeg will result in a progressive drop in quality. However if you're a "Happy Snapper" as apposed to being a serious photography, then Jpegs should be just fine.
I didn't explain what the .xmp file is, which was your original question. This is a file created by Photoshop (or Elements) that contains a record of the adjustments you have made to the Raw file. If you move both the Raw file and the xmp file to another computer all the edits will still be there. If you don't move the xmp file you will be back to square one.
Stands for Extensible Metadata Platform.
You can avoid these files appearing by converting your Raw files to DNG. This file format contains all the edits within it. and there is no xmp file.