XX zone appears to be a Space Station created by Dr. Eggman. It is likely a part of, or in sync with the Egg Utopia.
Having arrived in XX, Sonic and co. are confronted by Dr. Eggman, who uses rebuilt versions of every boss vehicle he has used against the heroes during this adventure. One by one however, the heroes manage to destroy Eggman's vehicles, until he is left to confront them with the Super Eggrobo Z. After Sonic and co. manage to destroy the giant mech, the XX space station starts to self-destruct. Afterward, Sonic and co. descend through the sky while the space station behind them crash lands at some place in the world, creating a large explosion. Nevertheless, the player's character lands at a meadow (in Cream's case, she is reunited with her mother), strikes a pose at the player and then the credits roll.
XX is a boss attack-type of level where the chosen character must again fight all the bosses that were previously fought in the game. They are easier to defeat this time around, as they require fewer hits.
The final boss for this stage is the Super Eggrobo Z. Once the giant mech boss is destroyed, the main quest for the character chosen is completed (except Sonic who has another stage to pursue after Eggman as Super Sonic but unlike Sonic Advance, the extra zone doesn't follow directly after the final zone and so the player is required to go back into Sonic's story mode and select the extra zone from there after the credits roll).
The stage's name (XX) is a reference to the X-Zone from Sonic Advance which has the same stage concept.
If the player clears this final zone, the music of the zone selection map would change to a remix version.