An XML document is organized as a tree of elements. When working on a large document you can collapse some elements leaving in the focus only the ones you need to edit. Expanding and collapsing works on individual elements: expanding an element leaves the child elements unchanged.
An unique feature of Oxygen is the fact that the folds are persistent: the next time you will open the document the folds are restored to the last state so you won't have to collapse the uninteresting parts again.
To toggle the folded state of an element click on the special mark displayed in the left part of the document editor next to the start tag of that element or click on the action Toggle fold available from the contextual menu or from the menu The element extent is marked with a grey line displayed in the left part of the edited document. The grey line always covers the lines of text comprised between the start tag and end tag of the element where the cursor is positioned.
Other menu actions related to folding of XML elements are available from the contextual menu of the folding stripe of the current editor: