Tab stops are important for programming in languages which use indentation to show nesting, as short-hand for producing white-space for leading indents. As a programmer, you have to decide how to use indentation, and how or whether tab characters map to your indentation scheme.
Ideally, tab characters map directly to the amount of indent that you use to distinguish nesting levels in your code. Unfortunately, the Unix standard for interpretation of tab characters is eight characters (probably dating back to mechanical capabilities of the original teletype), which is usually too coarse for a single indent.
Most text editors, XNEdit included, allow you to change the interpretation of the tab character, and many programmers take advantage of this, and set their tab stops to 3 or 4 characters to match their programming style. In XNEdit you set the hardware tab distance in Preferences -> Tab Stops... for the current window, or Preferences -> Default Settings -> Tab Stops... (general), or Preferences -> Default Settings -> Language Modes... (language-specific) to change the defaults for future windows.
Changing the meaning of the tab character makes programming much easier while you're in the editor, but can cause you headaches outside of the editor, because there is no way to pass along the tab setting as part of a plain-text file. All of the other tools which display, print, and otherwise process your source code have to be made aware of how the tab stops are set, and must be able to handle the change. Non-standard tab stops can also confuse other programmers, or make editing your code difficult for them if their text editors don't support changes in tab stop distance.
An alternative to changing the interpretation of the tab character is tab stop emulation. In the Tab Stops... dialog(s), turning on Emulated Tabs causes the Tab key to insert the correct number of spaces and/or tabs to bring the cursor the next emulated tab stop, as if tabs were set at the emulated tab distance rather than the hardware tab distance. Backspacing immediately after entering an emulated tab will delete the fictitious tab as a unit, but as soon as you move the cursor away from the spot, XNEdit will forget that the collection of spaces and tabs is a tab, and will treat it as separate characters. To enter a real tab character with "Emulate Tabs" turned on, use Ctrl+Tab.
It is also possible to tell XNEdit not to insert ANY tab characters at all in the course of processing emulated tabs, and in shifting and rectangular insertion/deletion operations, for programmers who worry about the misinterpretation of tab characters on other systems.