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.
I recommend you watch the video Web Application Projects & Web Deployment Projects on the ASP.NET website which explains the difference in great detail, it was quite helpful to me.
By the way, don't get confused by the title, a great part of the video explains the difference between website projects and web application projects and why Microsoft re-introduced Web application projects in Visual studio 2005 (as you probably already know, it originally shipped with only website projects then web application projects were added in SP1). A great video I highly recommend for anyone who wants to know the difference.