Putting an xml:base on your top level element (especially in your ontology) can save you a world of hurt for when you sling your, say, ontology file around.
For example, say you put your ontolgoy file at http://www.foobar.com/you/sampleOntology.daml and you also emailed that ontology file. Typically, there's no connection between the emailed version and the version on the web, so references to rdf:ID generate terms will be different depending on which way of getting that file is used. (To test, try passing a file with some rdf:IDs into the W3C
RDF Validator by URI and by cut and paste. You'll get different results!) But, if you include in your rdf:RDF element an xml:base attribute like:
xml:base="http://www.foobar.com/you/sampleOntology.daml"
references will work out correctly, no matter how one gets the file. (Try it in the validator!).