C# - Cannot implicitly convert type List<Product> to List<IProduct>

Yep it's a covariance limitation in C#. You can't convert a list of one type to a list of another.

Instead of:

List<contracts.IProduct> myList = new List<dto.Product>();

You have to do this

List<contracts.IProduct> myList = new List<contracts.IProduct>();

myList.Add(new dto.Product());

Eric Lippert explains why they implemented it this way: http://blogs.msdn.com/ericlippert/archive/tags/Covariance+and+Contravariance/default.aspx

(And why it is different than working with arrays of items).

You can't do that. If you have a List<IProduct>, you can put any IProduct in it. So if you have a Product2 which implements IProduct you could put it in the list. But the original list was created as List<Product>, so anyone using the list would expect only objects of type Product, not Product2 to be in the list.

In .NET 4.0, they added covariance and contravariance for interfaces, so you could convert IEnumerable<Product> to IEnumerable<IProduct>. But this still doesn't work for lists, since the list interface allows you both to "put stuff in" and "get stuff out".

Just as a remark: Covariance and Contravariance in Generics was added in C# 4.0.