You can let XSLT count occurrences of elements.

This lets you do things like hierarchical numbering.

An example:

<xsl:template match="section/title">
<title>Section <xsl:number count="section" level="multiple" format="1.1. "/>
<xsl:apply-templates/>
</title>
</xsl:template>x

Full Example: number.xsl sections.xml

Read chapter 9 in Learning XSLT for more information.