Modules exist to be extended. You cannot change the app/code/
files without prohibiting any future updates. Instead we add a module to the app/code/local
directory (the local directory may be missing, if so, it needs to be manually created. This is common in later versions of Magento) for added custom local functionality.
All Module config files begin with a <config>
tag. The new module is declared inside of the <modules>
tag. We will be calling a module named YOUR_COMPANY_HelloWorld, therefore the <YOUR_COMPANY_HelloWorld>
tags are used. In here we define the version (very first = 0.0.1)
A list of XML events can be found at: http://www.magentocommerce.com/wiki/5_-_modules_and_development/reference/module_config.xml
If you are having any trouble then check out: http://coding.smashingmagazine.com/2012/11/30/introducing-magento-layout/