You can mount XCI files using tools like SX OS (older, paid CFW) or convert them using tools like 4NXCI to make them installable like NSPs. However, most modern users prefer NSP files for DLC and updates because they integrate better with the system.
You generally use a homebrew application called Tinwoo, Awoo Installer, or DBI. Minecraft Legends Deluxe Edition Switch NSP XCI...
Example: How version updates differ