The following stylesheet:
<xsl:stylesheet version="1.0"
xmlns:xsl="http://www.w3.org/1999/XSL/Transform">
<xsl:output method="xml" omit-xml-declaration="yes" version="1.0" encoding="utf-8" indent="yes"/>
<xsl:strip-space elements="*"/>
<xsl:template match="/">
<output>
<xsl:apply-templates select="descendant::alter/*"/>
</output>
</xsl:template>
<xsl:template match="*">
<xsl:element name="{local-name()}">
<xsl:apply-templates select="@*|node()"/>
</xsl:element>
</xsl:template>
<xsl:template match="@*">
<xsl:copy/>
</xsl:template>
</xsl:stylesheet>
when applied to your example input, will produce this result:
<output>
<x> Hello </x>
<y role="Strong">World </y>
<w> How are </w>
<z role="Italic"> you? </z>
</output>
Removing the <output>
tags from the first template will result in invalid XML, which some processors (e.g. libxslt) may render as:
<x> Hello </x><y role="Strong">World </y><w> How are </w><z role="Italic"> you? </z>