If the directive is set to CDATA, the contained data is not entity encoded, but is put in the CDATA section. The CDATA attributes must be nameless.
The following query wraps the product model summary description in a CDATA section.
USE AdventureWorks2012; GO SELECT 1 as Tag, 0 as Parent, ProductModelID as [ProductModel!1!ProdModelID], Name as [ProductModel!1!Name], '<Summary>This is summary description</Summary>' as [ProductModel!1!!CDATA] -- no attribute name so ELEMENT assumed FROM Production.ProductModel WHERE ProductModelID=19 FOR XML EXPLICIT
This is the result:
<ProductModel ProdModelID="19" Name="Mountain-100"> <![CDATA[<Summary>This is summary description</Summary>]]> </ProductModel>