"Xanadu" took the dungeon-exploration base of "Dragon Slayer," the first game in the saga, and combined it with much more elaborate experience, equipment, and item systems, in a hybrid of action and role-playing that became enormously influential in mid-'80s Japan — it's said to have sold hundreds of thousands of copies on PC-88 alone before jumping to other platforms. The MSX version brought that formula to the computer scene most popular outside Japan, although the game was never officially translated into English at the time.
It's a fundamental piece for understanding the genealogy of the Japanese action RPG: without Xanadu it's harder to later explain Ys, the open-dungeon Zelda games, or much of the action role-playing Falcom kept refining in the following decades.
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