What is "respond_to" and "do" and "|format|" in this Rails code?

class PostsController < ApplicationController
  # GET /posts
  # GET /posts.xml
  def index
    @posts = Post.all

    respond_to do |format|
      format.html # index.html.erb
      format.xml  { render :xml => @posts }
    end
  end
...

• What exactly is "respond_to" Is it part of rails?
• What is "do" and"|format|"? Why are there vertical separators around format?
• How come Rails knows about the Post model? I didn't import that model. (In Python/Django, you have to import a model before you can use it)

This is from the Ruby on Rails tutorial: http://edgeguides.rubyonrails.org/getting_started.html#setting-the-application-home-page