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Much like the HTML script element, this is used to declare a script to be used by the XUL window. You should usually put scripts in a separate file pointed to by the src attribute, but you may also place the script inline inside the opening and closing script tags.
More information is available in the XUL tutorial.
The language of the script. Usually, you would set this to application/javascript.
Note: If the JavaScript file is in chrome://, setting this attribute to application/javascript will always use the latest available JavaScript version. If you omit this attribute, the default (and older) JavaScript version is used (like you get when including a JavaScript file from web content without specifying a version number).