Introduction:
An XOR (Exclusive OR) gate is a digital logic gate that produces an output signal only when the number of high inputs is odd. It is commonly used in electronic circuits to perform logical operations.

Explanation:
An XOR gate has two inputs, A and B, and one output, Y. The output Y is high (1) when the inputs A and B are different, and low (0) when the inputs A and B are the same.

Working of an XOR Gate:
The working principle of an XOR gate can be understood by considering the truth table of the gate. A truth table lists all possible combinations of inputs and their corresponding outputs.

Truth Table:
The truth table for an XOR gate is as follows:

| A | B | Y |
|---|---|---|
| 0 | 0 | 0 |
| 0 | 1 | 1 |
| 1 | 0 | 1 |
| 1 | 1 | 0 |

Explanation of the Truth Table:
- When both inputs A and B are low (0), the output Y is also low (0). This corresponds to the first row of the truth table.
- When input A is low (0) and input B is high (1), or vice versa, the output Y is high (1). This corresponds to the second and third rows of the truth table.
- When both inputs A and B are high (1), the output Y is low (0). This corresponds to the fourth row of the truth table.

Conclusion:
From the truth table, we can conclude that an XOR gate produces an output only when the inputs A and B are different. If the inputs are the same, the output will be low. Therefore, the correct answer is option 'C', which states that an XOR gate produces output only when two inputs are different.