How does the variable that contains Records/Record gain access to this
data?  Is it an external XML document accessed via the document
function?

If I were to make an educated guess, it seems in this case you are
desirous to obtain from the Records/Record/activity data-set, those
'activity' elements in which contains a text node who's string value is
equal to the string value of the text node contained between the opening
and closing activity element of the second data-set in which contains an
attribute who's name is 'neccesary' and whos value is equal to = 'yes'.

In other words, you want to create an index with the second data set of
only those elements in which contain a necessary attribute = 'yes'.
                 ...............
With the above index, you now want to parse through the first data set,
and locate elements that contain the same string value, in this case
'Writing', outputting the result of this processing.

Is this correct?

If yes, then lets make sure you are operating on data that is a proper
node-set instead of a RTF first, and move forward into understanding how
to use keys to properly group and filter your data.