>Therefore, when I create the site (SiteName) and point to the physical folder \SiteName and there are no files there, how will it work?

The default file or files that can be read from a root directory is defined in IIS in the default files. Usually, default.aspx would be there. So, this works like a domain. If the root of your domain is at c:\inetpub\wwwroot\SiteName, then if there is a Default.aspx file in there, accessing http:///www.mydomain.com will search for it. If none can be found, you will end up with a 404.

So, simply make sure you have the file or one of the files in each of those sub directories (virtual directories at the IIS level), and accessing http://www.mydomain.com/Applic1 should work.