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
Once the website or webapplication is compiled there is no difference for the webserver. The .NET handlers in IIS always:
In the scenarios where the site is compiled completely into a single dll there are either still single line ASPX files telling the .NET handlers in IIS where to get the code. Or the ASPX pages can be removed altogether with some extra configuration lines in the web.conig.
But the short answer is really once compiled they are identical.