Finally the Android team have provided a great feature which helps formatting the XML files needed by any Android application (menu, strings, layout, etc…).
To see this feature in action, open up an XML file (layout for example) and press Ctrl+Shift+F and.. voila.. your code will finally be formatted in a very readable way (as I usually tried to achieve myself).
For a great explanation, please refer to the following article: XML Formatter – Android Tools Project Site.