XSL Link option allows to link an XSLT stylesheet uploaded to the site for processing and transforming List View data to which the web part is connetcted.
The input xml passed to XSLT is described here https://msdn.microsoft.com/en-us/library/office/ff602042(v=office.14).aspx
There are two main ways to work:
- Just transform input data and render it as wanted
- Include the default templates and override those as required