ASP.NET Web Site or ASP.NET Web Application?

Website:

The Web Site project is compiled on the fly. You end up with a lot more DLL files, which can be a pain. It also gives problems when you have pages or controls in one directory that need to reference pages and controls in another directory since the other directory may not be compiled into the code yet. Another problem can be in publishing.

If Visual Studio isn't told to re-use the same names constantly, it will come up with new names for the DLL files generated by pages all the time. That can lead to having several close copies of DLL files containing the same class name, which will generate plenty of errors. The Web Site project was introduced with Visual Studio 2005, but it has turned out not to be popular.

Web Application:

The Web Application Project was created as an add-in and now exists as part of SP 1 for Visual Studio 2005. The main differences are the Web Application Project was designed to work similarly to the Web projects that shipped with Visual Studio 2003. It will compile the application into a single DLL file at build time. To update the project, it must be recompiled and the DLL file published for changes to occur.

Another nice feature of the Web Application project is it's much easier to exclude files from the project view. In the Web Site project, each file that you exclude is renamed with an excluded keyword in the filename. In the Web Application Project, the project just keeps track of which files to include/exclude from the project view without renaming them, making things much tidier.

Reference

The article ASP.NET 2.0 - Web Site vs Web Application project also gives reasons on why to use one and not the other. Here is an excerpt of it:

• You need to migrate large Visual Studio .NET 2003 applications to VS 2005? use the Web Application project.
• You want to open and edit any directory as a Web project without creating a project file? use Web Site project.
• You need to add pre-build and post-build steps during compilation? use Web Application project.
• You need to build a Web application using multiple Web projects? use the Web Application project.
• You want to generate one assembly for each page? use the Web Site project.
• You prefer dynamic compilation and working on pages without building entire site on each page view? use Web Site project.
• You prefer single-page code model to code-behind model? use Web Site project.

Web Application Projects versus Web Site Projects (MSDN) explains the differences between the web site and web application projects. Also, it discusses the configuration to be made in Visual Studio.

Web Site is what you deploy to an ASP.NET web server such as IIS. Just a bunch of files and folders. There’s nothing in a Web Site that ties you to Visual Studio (there’s no project file). Code-generation and compilation of web pages (such as .aspx, .ascx, .master) is done dynamically at runtime, and changes to these files are detected by the framework and automatically re-compiled. You can put code that you want to share between pages in the special App_Code folder, or you can pre-compile it and put the assembly in the Bin folder.

Web Application is a special Visual Studio project. The main difference with Web Sites is that when you build the project all the code files are compiled into a single assembly, which is placed in the bin directory. You don’t deploy code files to the web server. Instead of having a special folder for shared code files you can put them anywhere, just like you would do in class library. Because Web Applications contains files that are not meant to be deployed, such as project and code files, there’s a Publish command in Visual Studio to output a Web Site to a specified location.

App_Code vs Bin

Deploying shared code files is generally a bad idea, but that doesn’t mean you have to choose Web Application. You can have a Web Site that references a class library project that holds all the code for the Web Site. Web Applications is just a convenient way to do it.

CodeBehind

This topic is specific to .aspx and .ascx files. This topic is decreasingly relevant in new application frameworks such as ASP.NET MVC and ASP.NET Web Pages which do not use codebehind files.

By having all code files compiled into a single assembly, including codebehind files of .aspx pages and .ascx controls, in Web Applications you have to re-build for every little change, and you cannot make live changes. This can be a real pain during development, since you have to keep re-building to see the changes, while with Web Sites changes are detected by the runtime and pages/controls are automatically recompiled.

Having the runtime manage the codebehind assemblies is less work for you, since you don't need to worry about giving pages/controls unique names, or organizing them into different namespaces.

I’m not saying deploying code files is always a good idea (specially not in the case of shared code files), but codebehind files should only contain code that perform UI specific tasks, wire-up events handlers, etc. Your application should be layered so that important code always end up in the Bin folder. If that is the case then deploying codebehind files shouldn't be considered harmful.

Another limitation of Web Applications is that you can only use the language of the project. In Web Sites you can have some pages in C#, some in VB, etc. No need for special Visual Studio support. That’s the beauty of the build provider extensibility.

Also, in Web Applications you don't get error detection in pages/controls as the compiler only compiles your codebehind classes and not the markup code (in MVC you can fix this using the MvcBuildViews option), which is compiled at runtime.

Visual Studio

Because Web Applications are Visual Studio projects you get some features not available in Web Sites. For instance, you can use build events to perform a variety of tasks, e.g. minify and/or combine Javascript files.

Another nice feature introduced in Visual Studio 2010 is Web.config transformation. This is also not available in Web Sites. Now works with Web Sites in VS 2013.

Building a Web Application is faster than building a Web Site, specially for large sites. This is mainly because Web Applications do not compile the markup code. In MVC if you set MvcBuildViews to true then it compiles the markup code and you get error detection, which is very useful. The down side is that every time you build the solution it builds the complete site, which can be slow and inefficient, specially if you are not editing the site. l find myself turning MvcBuildViews on and off (which requires a project unload). On the other hand, with Web Sites you can choose if you want to build the site as part of the solution or not. If you choose not to, then building the solution is very fast, and you can always click on the Web Site node and select Build, if you’ve made changes.

In an MVC Web Application project you have extra commands and dialogs for common tasks, like ‘Add View’, ‘Go To View’, ‘Add Controller’, etc. These are not available in an MVC Web Site.

If you use IIS Express as the development server, in Web Sites you can add virtual directories. This option is not available in Web Applications.

NuGet Package Restore does not work on Web Sites, you have to manually install packages listed on packages.config Package Restore now works with Web Sites starting NuGet 2.7

Web Site = use when the website is created by graphic designers and the programmers only edit one or two pages

Web Application = use when the application is created by programmers and the graphic designers only edit one or two paged/images.

Web Sites can be worked on using any HTML tools without having to have developer studio, as project files don’t need to be updated, etc. Web applications are best when the team is mostly using developer studio and there is a high code content.

(Some coding errors are found in Web Applications at compile time that are not found in Web Sites until run time.)

Warning: I wrote this answer many years ago and have not used Asp.net since. I expect things have now moved on.

Unless you have a specific need for a dynamically compiled project, don't use a web site project.

Why? Because web site project will drive you up the wall when trying to change or understand your project. The static typing find features (e.g. find usages, refactor) in Visual Studio will all take forever on any reasonably sized project. For further information, see the Stack Overflow question Slow “Find All References” in Visual Studio.

I really can't see why they dropped web applications in Visual Studio 2005 for the pain-inducing, sanity-draining, productivity carbuncle web site project type.

There is an article in MSDN which describes the differences:

Comparing Web Site Projects and Web Application Projects

BTW: there are some similar questions about that topic, e.g:

• Web Site vs. ASP.Net Web Application in Visual Studio note: was removed, no longer on SO
• website or webapplication in.ASP.NET