Yes, xz-utils contains a C library, though it still caries the name
"liblzma.so", probably for historic reasons.
You are right that xz is a file format based around the lzma algorithm.
It just uses a more advanced container format. (lzma-utils had no
container at all.)

xz is the successor of lzma, which provides a better compression than
bzip2, while decompression speed is comparable with gzip. It is used by
the GNU project for source tarball compression (replacing bzip2) and
supported by GNU tar. See http://en.wikipedia.org/wiki/Xz,
http://tukaani.org/xz/ and http://tukaani.org/lzma/ for reference.