Non-jQuery version:

var parseXml;

if (window.DOMParser) {
    parseXml = function(xmlStr) {
        return ( new window.DOMParser() ).parseFromString(xmlStr, "text/xml");
    };
} else if (typeof window.ActiveXObject != "undefined" && new window.ActiveXObject("Microsoft.XMLDOM")) {
    parseXml = function(xmlStr) {
        var xmlDoc = new window.ActiveXObject("Microsoft.XMLDOM");
        xmlDoc.async = "false";
        xmlDoc.loadXML(xmlStr);
        return xmlDoc;
    };
} else {
    parseXml = function() { return null; }
}

var xmlDoc = parseXml("<foo>Stuff</foo>");
if (xmlDoc) {
    window.alert(xmlDoc.documentElement.nodeName);
}

Since jQuery 1.5, you can use jQuery.parseXML(), which works in exactly the same way as the above code:

var xmlDoc = jQuery.parseXML("<foo>Stuff</foo>");
if (xmlDoc) {
    window.alert(xmlDoc.documentElement.nodeName);
}

You haven't told us how you go about displaying that object. XMLSerializer works on DOM nodes, so your object has to be added somewhere, for example:

document.getElementById('SomeDiv').appendChild(xml); 

and if you just want the full xml string to be displayed:

var xmlText = new XMLSerializer().serializeToString(xml);
var xmlTextNode = document.createTextNode(xmlText);
var parentDiv = document.getElementById('SomeDiv');
parentDiv.appendChild(xmlTextNode);

You can do this by serializing just the root node:

new XMLSerializer().serializeToString(xmlObject.documentElement);

Demo: http://jsfiddle.net/timdown/LmWkL/

You will need to serialize your xmlDoc back to XML once you have made the changes:

var s = new XMLSerializer();
var newXmlStr = s.serializeToString(xmlDoc);

Now you can do what you need to do with the string of updated XML, overwrite your xml variable, or send it to the server, or whatever...

See the MDN docs for further info

Here it is:

<script type='text/javascript'>

function xmlToString(xmlData) { 

    var xmlString;
    //IE
    if (window.ActiveXObject){
        xmlString = xmlData.xml;
    }
    // code for Mozilla, Firefox, Opera, etc.
    else{
        xmlString = (new XMLSerializer()).serializeToString(xmlData);
    }
    return xmlString;
}   

</script>

Taken from here

Updated answer for 2017

The following will parse an XML string into an XML document in all major browsers. Unless you need support for IE <= 8 or some obscure browser, you could use the following function:

function parseXml(xmlStr) {
   return new window.DOMParser().parseFromString(xmlStr, "text/xml");
}

If you need to support IE <= 8, the following will do the job:

var parseXml;

if (typeof window.DOMParser != "undefined") {
    parseXml = function(xmlStr) {
        return new window.DOMParser().parseFromString(xmlStr, "text/xml");
    };
} else if (typeof window.ActiveXObject != "undefined" &&
       new window.ActiveXObject("Microsoft.XMLDOM")) {
    parseXml = function(xmlStr) {
        var xmlDoc = new window.ActiveXObject("Microsoft.XMLDOM");
        xmlDoc.async = "false";
        xmlDoc.loadXML(xmlStr);
        return xmlDoc;
    };
} else {
    throw new Error("No XML parser found");
}

Once you have a Document obtained via parseXml, you can use the usual DOM traversal methods/properties such as childNodes and getElementsByTagName() to get the nodes you want.

Example usage:

var xml = parseXml("<foo>Stuff</foo>");
alert(xml.documentElement.nodeName);

If you're using jQuery, from version 1.5 you can use its built-in parseXML() method, which is functionally identical to the function above.

var xml = $.parseXML("<foo>Stuff</foo>");
alert(xml.documentElement.nodeName);