There are currently two package.xml format versions. The <package format="2"> is recommended for new development.
The original <package format="1"> was used for most packages released to Groovy and Hydro. It is still fully supported and maintainers need not re-release their packages merely to upgrade the package version.
Use these instructions when making small changes to an existing format 1 package. Larger changes would justify migrating to format 2. Never mix versions in a single package.