why doesn't xterm work with my script?

Make sure that your script begins with a shebang in the form:

#!/bin/bash #(or #!/bin/sh for POSIX compliance)

Next make sure that you have made your script executable by ruing:

$ chmod +x my_script.sh

Finally try and run your script:

$ ./my_script.sh

Keep in mind that xterm is a graphical terminal emulator not Bash itself.