Is there a service that will turn an image with text on it to actual text or XML?
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Your are looking for Optical Character Recognition , OCR.
ocropus Was (or is) sponsored by google.
Acording to http://googlesystem.blogspot.com/2007/04/open-source-ocr-software-sponsored-by.html there should be a web service, but I don’t know so far.
For an webservice try free-ocr dot com . It’s not suitable for photos or bad scans, and does only ouput plain text but workes faily well.
Also there is scanr dot com but i haven’t used it yet, but since you tagged your wuestion with “mobile” it’s proably worth a look.