ONET.XML is used to define site templates. It is used during the provisioning process to create the pages, lists, etc. that belong to the site. Once a site is deployed, it will not have its own ONET.XML file. Changes like changing the master page name need to be done either through Sharepoint Designer, Sharepoint itself, or the filesystem (usually with Visual Studio) depending on what kind of site you have deployed and which features you have enabled.
The various ONET.XML files for your installed site templates can be found in the 12 Hive for Sharepoint...
Usually C:\Program Files\Common Files\Microsoft Shared\Web Server Extensions\12\TEMPLATES\{template name}
Getting the specifics (can't remember off the top of my head which folder you'll find the onet.xml file in...and it depends on the site template).