In SharePoint, Site Definition contains 3 main files:
The global Onet.xml file defines the list templates for hidden lists, list base types, a default definition configuration, navigation areas, list templates, document templates, modules, components. It Contains one or more configuration for site template including specification of components used, such as features, lists and webparts. It is a core of site definition.
It also specifies which feature to load, where the webparts go, etc.
If the site definition is created using visual studio 2010 site definition site template, a basic Onet.xml has been generated automatically. Each Onet.xml which is stored in \TEMPLATE\SiteTemplate\XML\Onet.xml.
Onet.xml is a part of web template.
Depending on where an Onet.xml file is located and whether it is a part of site definition or web template, markup in the file does following :
i) Specifies the list type, pages, files and webparts that are built in to the website that are created from site definition or web template.
ii) Defines Top and Left navigation areas.