Digest Value - What is calculated?

I am trying to understand the standard for a simple implementation for a
project.
I would like to know what exactly are the digest and signing algos applied
to?
Is it the tag + data or just the data?
For example consider the document below

....
<MyDataElement Id="mydata">DataToBeSigned</MyDataElement>
...
<Reference URI="#mydata">
    <DigestMethod Algorithm="http://www.w3.org/2000/09/xmldsig#sha1" />
   <DigestValue>Digest</DigestValue>
</Reference>


Is the Digest value calculated for "
<MyDataElement Id="mydata">DataToBeSigned</MyDataElement>"
or is it just calculated for "DataToBeSigned"

Thanks for any help.
Tarun