XDocument represents a whole XML document. It is normally composed of a number of elements.
XElement represents an XML element (with attributes, children etc). It is part of a larger document.
Use XDocument when working with a whole XML document, XElement when working with an XML element.
For example – XElement has a HasAttributes property indicating whether any attributes exist on the element, but an XDocument doesn’t, as such a property is meaningless in the context of a whole XML Document.