How does IIS know if it's serving a Web Site or a Web Application project?

Question

I understand that Web Site Projects compile source on-the-fly, and Web Application Projects pre-compile source into a DLL (much like ASP.Net 1.x).

But how is the differe

Answer 1

All IIS does is pass the incoming request to the appropriate handler. In the case of an ASP.NET site/application it is aspnet_isapi.dll. The handler then takes care of everything from there.