Introduction to Web Application Projects

Purpose of Web Application Projects
The goal of Web application projects is to address some of the feedback we have heard from customers. Some developers find migrating Visual Studio .NET 2003 applications to the new Web site model in Visual Studio 2005 impractical, especially because precompiling (publishing) a Visual Studio 2005 Web site creates multiple assemblies.
The new Web application project type also enables some scenarios where Visual Studio 2005 Web projects are different than in the previous version of Visual Studio. For example, the new model has different semantics for Web subprojects where the subproject is not an ASP.NET or IIS application, but instead feeds its generated assembly to a parent application's Bin folder.

http://msdn.microsoft.com/en-us/library/aa730880(VS.80).aspx

Useful when choosing which type of projects to use.