When I start a new ASP.NET project in Visual Studio, I can create an ASP.NET Web Application or I can create an ASP.NET Web Site.
What is the difference between ASP.
Unless you have a specific need for a dynamically compiled project, don't use a web site project.
Why? Because web site project will drive you up the wall when trying to change or understand your project. The static typing find features (e.g. find usages, refactor) in Visual Studio will all take forever on any reasonably sized project. For further information, see the Stack Overflow question Slow “Find All References” in Visual Studio.
I really can't see why they dropped web applications in Visual Studio 2005 for the pain-inducing, sanity-draining, productivity carbuncle web site project type.