An application-defined as all the directories and files contained within a directory marked as an application starting point until another application starting point reached.
If you make your site's home directory an application point, then every virtual directory and physical directory within your site can participate in the application.

To make this directory an application starting point and thus create an application, click the Create button. To dissociate this home directory from an application click the Remove button. Type the name of the application in the Name text box. The name will appear in the property sheets for any directory contained within the application boundary.

Run in Separate Memory Space – Select this check box to run the application in a separate process from the Web server process. Running an isolated application protects other applications, including the web server itself, from being affected if this application crashes or hangs.

Permission – This property controls whether applications can be run in this directory

Name – Does not allow any programs or scripts to run in this directory.

Script – Enables a script engine to run in this directory without having Execute permissions set.

Execute – Allows an application to run in this directory, including script engines and Windows NT binaries (.dll and .exe files)