False dichotomy.
Better than XML and binary blobs:
* JSON (assuming everyone knows what this is)
* YAML [0]
* Lua tables (if you're already using Lua as a scripting language; Lua started out as a configuration language after all)
* INF format [1] (not my favorite, but pretty easy to parse and much better for humans to read than XML)
* Any of the above compressed with a gzip compatible compression (if size matters, though it rarely does these days)
Even Protocol Buffers [2] are better than XML, though at that point it becomes a "documented binary blob". But as long as the spec is shared, the format can easily be read by just about any programming language.
[0] https://en.wikipedia.org/wiki/YAML