Check http://en.wikipedia.org/wiki/Flow_control
Then look in the 90000982_B.pdf doc on the series 1 XBees, Chapter 2, page 10 for the connection diagram and Page 12 describes the Flow control using RTS & CTS.
~CTS is Clear To Send. An output from the device receiving data from another device. When asserted (low) it is telling the other device it is Clear to send data.
~RTS is Request To Send. An input to the device sending the serial data meaning the other device is ready to receive data when asserted (low). The receiving device Request data.
When connecting two serial devices, say an XBee and a processor (UART) this is really connecting two UARTs together. TX (DO) on one device connects to the RX (DI) on the other device. Same with ~RTS & ~CTS. This way the definitions are uniform when looking from either device.
Any help?