It is a head scratcher - why didn't Google simply code up a full version of Chrome for the Tablet Browser? That makes more sense than what they did.
It is effectively Chrome.
The issue you're seeing is a side effect of there not being any official Android based tablets until the last few months.
Every browser contains a string called a user agent, which identifies the browser's make, model, and target platform.
In the case of the Xoom, the agent is:
Mozilla/5.0 (Linux; U; Android 3.0; en-us; Xoom Build/HRI39) AppleWebKit/534.13 (KHTML, like Gecko) Version/4.0 Safari/534.13
Most websites that have mobile sites use a bunch of rules to determine whether you're on a mobile device or a regular full fledged desktop browser. Until recently, all you had to do was check to see if the word "Android" was in the agent string, and that was sufficient to assume it was a phone, and safe to display the mobile site.
With the first official Honeycomb tablet out now, this logic will have to become more sophisticated and it will take a bit of time for sites to recognize this and make the necessary changes. Until then, the Xoom will need to fake the user agent. I'm surprised that Google didn't make it easier to change your agent, but then again the Xoom was definitely rushed to market, so us early adopters will have to sweat it out for a bit. This sort of fix is super easy though... wouldn't be surprised if the dev community creates a permanent patch before the Google folks do.