Create a tar.xz in one command

Use the -J compression option for xz. And remember to man tar :)

tar cfJ <archive.tar.xz> <files>

Edit 2015-08-10:

If you're passing the arguments to tar with dashes (ex: tar -cf as opposed to tar cf), then the -f option must come last, since it specifies the filename (thanks to @A-B-B for pointing that out!). In that case, the command looks like:

tar -cJf <archive.tar.xz> <files>

Switch -J only works on newer systems. The universal command is:

To make .tar.xz archive

tar cf - directory/ | xz -z - > directory.tar.xz

Explanation

1. tar cf - directory reads directory/ and starts putting it to TAR format. The output of this operation is generated on the standard output.

2. | pipes standard output to the input of another program...

3. ... which happens to be xz -z -. XZ is configured to compress (-z) the archive from standard input (-).

4. You redirect the output from xz to the tar.xz file.

If you like the pipe mode, this is the most clean solution:

tar c some-dir | xz > some-dir.tar.xz

It's not necessary to put the f option in order to deal with files and then to use - to specify that the file is the standard input. It's also not necessary to specify the -z option for xz, because it's default.

It works with gzip and bzip2 too:

tar c some-dir | gzip > some-dir.tar.gz

or

tar c some-dir | bzip2 > some-dir.tar.bz2

Decompressing is also quite straightforward:

xzcat tarball.tar.xz | tar x
bzcat tarball.tar.bz2 | tar x
zcat tarball.tar.gz | tar x

If you have only tar archive, you can use cat:

cat archive.tar | tar x

If you need to list the files only, use tar t.

Quick Solution

tarxz() { tar cf - "$1" | xz -4e > "$1".tar.xz ; }
tarxz name_of_directory

(Notice, not name_of_directory/)

Using xz compression options

If you want to use compression options for xz, or if you are using tar on MacOS, you probably want to avoid the tar -cJf syntax.

According to man xz, the way to do this is:

tar cf - filename | xz -4e > filename.tar.xz

Because I liked Wojciech Adam Koszek's format, but not information:

1. c creates a new archive for the specified files.
2. f reads from a directory (best to put this second because -cf != -fc)
3. - outputs to Standard Output
4. | pipes output to the next command
5. xz -4e calls xz with the -4e compression option. (equal to -4 --extreme)
6. > filename.tar.xz directs the tarred and compressed file to filename.tar.xz

where -4e is, use your own compression options. I often use -k to --keep the original file and -9 for really heavy compression. -z to manually set xz to zip, though it defaults to zipping if not otherwise directed.

To uncompress and untar

To echo Rafael van Horn, to uncompress & untar (see note below):

xz -dc filename.tar.xz | tar x

Note: unlike Rafael's answer, use xz -dc instead of catxz. The docs recommend this in case you are using this for scripting. Best to have a habit of using -d or --decompress instead of unxz as well. However, if you must, using those commands from the command line is fine.