When you select the button (by default with double clicking the left mouse button, or holding down the Control key and pressing the left mouse button), xlogout exits, and your X server exits.
Be sure you do not put xlogout into the background, or it will not do anything useful.
Logout*Quit*Background: Red
Logout*Quit*Font: -*-helvetica-bold-o-normal--*-180-*-*-*-*-*-*
!Logout*Quit*Label: Quit X
Logout*Quit*Cursor: hand2
Logout*Quit*pointerColor: White
Logout*Quit*bitmap: /usr/include/X11/bitmaps/xlogout.xbm
Logout*Quit*Translations: Ctrl Shift <Btn1Down>:set()\n\
Ctrl Shift <Btn1Up>:notify() unset()\n\
<Btn1Down>(2+):set() notify() unset()\n\
<Key>Q:set() notify() unset()\n\
Ctrl<Key>c:set() notify() unset()\n\
<EnterWindow>:highlight()\n\
<LeaveWindow>:reset()
Using these resources, the user will see a red background
with either a white mushroom cloud (as provided) or the
words ``Quit X'' in white letters (if the Label resource
is uncommented).
Logout.Quit
This is the Command widget used at the xlogout button. All the standard Command resources apply, but the following, in particular, affect perceived behavior.
Resource name Usage Label If specified, text will appear in xlogout bitmap If specified, the designated bitmap file will be used as the image displayed by xlogout Translations The built-in defaults are simplistic.