Xbee sends data periodically to coordinator,what will be the interfacing circuit with avr atmega168?
From the product info at the link you provided, it does not appear to have any pins available for your microcontroller. This board has a USB interface, which means it is the "PC end" of the wireless pair. What you need is the partner board, such as this one, which is designed to connect to your Mega.

From the product description:


  XBee USB wireless adaptor board is used for interfacing any of the series 1 XBee wireless modules with the PC. Using this USB adaptor board for XBee wireless modules you can communicate between PC to PC, PC to robot / embedded board with ease. You can also use this module to change configuration of the XBee devices using PC via USB port using XCTU software from Digi.
  
  On the PC side this device is treated as the Communication Device Class (CDC) of USB family and it allows the user to treat USB port as a normal serial port (Virtual COM port).