In this tutorial I'll show you the difference between ASP.NET Web Application and Web Site.
Firstly there is a difference in compilation. Web Site is not pre-compiled on server, it is compiled on file. It may be an advantage because when you want to change something in your Web Site you can just download a specific file from server, change it and upload this file back to server and everything would work fine. In Web Application you can't do this because everthing is pre-compiled and you end up with only one dll. When you change something in one file of your project you have to re-compile everything again. So if you would like to have a possibility to change some files on server Web Site is better solution for you. It also allows many developers to work on one Web Site. On the other side, if you don't want your code to be available on server you should rather choose Web Application. This option is also better for Unit Testing because of one DLL file being created after publishing your website.
There is also a difference in the structure of the project. In Web Application you have a project file just like you had it in normal application. In Web Site there is no traditional project file, all you have is solution file. All references and settings are stored in web.config file.
There is a different attribute in @Page directive for the file that contains class associated with this page. In Web Application it is standard "CodeBehind", in Web Site you use "CodeFile". You can see this in the examples below:
In the example above you can see also another difference - how namespaces are created. In Web Application namespace is simply a name of the project. In Website there is default namespace ASP for dynamically compiled pages.
Edit and Continue
In Web Application Edit and Continue option is available (to turn it on you have to go to Tools Menu, click Options then find Edit and Continue in Debugging). This feature is not working in Web Site.
If you want to develop web applications using ASP.NET MVC (Model View Controller) the best and default option is Web Application. Although it's possible to use MVC in Web Site it's not recommended.
The most important difference between ASP.NET Web Application and Web Site is compilation. So if you work on a bigger project where a few people can modify it it's better to use Web Site. But if you're doing a smaller project you can use Web Application as well.