Example for extension

 <complexType name="Address">
  <sequence>
   <element name="name"   type="string"/>
   <element name="street" type="string"/>
   <element name="city"   type="string"/>
  </sequence>
 </complexType>
 <complexType name="USAddress">
  <complexContent>
   <extension base="Address">
    <sequence>
     <element name="state" type="USState"/>  
     <element name="zip"   type="positiveInteger"/>
    </sequence>
   </extension>
  </complexContent>
 </complexType>

Ie, additional elements are added to the address (US State and Zip code). A USAddress can now be used wherever an Address is expected.