The $X_i$ are the partitions of the graph and the condition says that there can be no edge within an $X_i$, i.e. there are only connection from one partition to another. One can also few the partitions as different coloring of their vertices.
From any $v\in X_i$, there can be edges to only the other partitions, i.e. to at most $|V|-|X_i|$ different other vertices. If we sum up the edges for all partitions and divide the double-counting out, we find that for an $k$-partite graph
$|E|\le \frac{1}{2}\sum_{i=1}^k |X_i|\cdot (|V|-|X_i|)$