>>In VS 2005, I have an option for creating a new web site, and I have an option for creating a new web application. What is the difference, and which should be I be doing?
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>If I am not mistaken, the Web Application as a project file associated with it and the application doesn't.

I see one type I can actually compile and it seems to create some sort of compiled assembly, and the other is the more traditional approach with the separate .aspx files.