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When you create a new website on IIS, you get to choose between an "Application" and a "Virtual Directory". What is the difference between those two options?

+1  A: 

A virtual directory is just a pointer to where web pages are stored.

A Application reserves memory in IIS for your web pages. If you are attempting to run ASP pages and plan to make use of Session variables and the such then you must use an application. An Applicaiton can make use of a virtual directory or it may just exist within the default web sites directory (inetpub/wwwroot/)

Jay
+3  A: 

There are a few differences, here are the biggest:

  • In IIS 6 and up, you can assign an application a certain "protection" level. (e.g. protection levels, application pools, etc). You can't do this with Virtual Directories
  • If you are working with ASP.NET, the search for the master "Web.config" file for your application stops at your application level. For a working directory it will actually check your parent hierarchy for settings as well.

These are the two biggest differences in my opinion, although there are other small ones as well.

mjmarsh