xz XZ is a compressed file format. It incorporates the LZMA compression algorithms. The format can only hold one file at a time. This compression format is used by programs like 7-zip and p7zip. XZ format's implementation is freely available.
txz The TXZ file extension is typically found in archive files which are created using a combination of TAR and the XZ utilities. TXZ files contain multiple files which are first archived using Tar and later compressed using the technology of XZ compression. TXZ files are known to be smaller in comparison to TGZ files. From a more basic perspective, XZ utilities compress TAR archive files just like how GZ utilities compress various TAR archives, the only difference being in the compression ratios and the resulting file sizes after compression.