Something weird that I've been seeing, a web application written in ASP.Net (C#) that got the source code on the production server and compile that way. So when I deploy to the server I deploy the source code.
Why does .Net have this functionality? Doesn't make sense.
This is the way ASP.Net Web Sites work.
Notice that it's very similar to ASP classic, which ASP.Net superseded.
You can also deploy pre-compiled sites, if you want to.
Faster debugging cycle is my guess. For very large projects compiling everything takes time. If you're not interested in bleeding-edge performance (ie debugging a page or 2 over and over and over and over), you can choose not to recompile every time you make an adjustement.
I have already posted as a comment that I believe that this is a "Web Site" project and not a "Web Application" project, but I wanted to also add this link, which includes some nice links to comparisons of the two project types.
http://www.codersbarn.com/post/2008/06/ASPNET-Web-Site-versus-Web-Application-Project.aspx