It is because you haven't defined the xsl namespace. Change
<xsl:stylesheet version="1.0" xmlns="http://www.w3.org/1999/XSL/Transform">
to
<xsl:stylesheet version="1.0" xmlns:xsl="http://www.w3.org/1999/XSL/Transform">
You also need to add an 'atom' namespace in order to make your 'for-each' and 'value-of' directives work, and you probably want to disable output escaping on your title fields to make the tags within them show up as markup. I suggeest this:
<?xml version="1.0" encoding="iso-8859-1"?>
<xsl:stylesheet version="1.0" xmlns:xsl="http://www.w3.org/1999/XSL/Transform"
xmlns:atom="http://www.w3.org/2005/Atom">
<xsl:output method="html"/>
<xsl:template match="/">
<html xmlns="http://www.w3.org/1999/xhtml">
<body>
<table border="1">
<tr bgcolor="#9acd32">
<th>Title</th>
<th>Author</th>
<th>Updated</th>
</tr>
<xsl:for-each select="atom:feed/atom:entry">
<tr>
<td>
<xsl:value-of select="atom:title" disable-output-escaping="yes"/>
</td>
<td>
<xsl:value-of select="atom:author"/>
</td>
<td>
<xsl:value-of select="atom:updated"/>
</td>
</tr>
</xsl:for-each>
</table>
</body>
</html>
</xsl:template>
</xsl:stylesheet>