Difference Between ApplicationPages and SitePages

Pages that support user customization are known as site pages. E.g. the page that we could see inside our SharePoint designer like default.aspx (home page), NewForm, EditForm,DispForm.aspx etc. The site pages could easily be customized without making any changes to the local file system of the front-end web server and without any need of developer involved for that. This is possible by storing the customized version of the aspx and master page files inside the content database. The saving and retrievig of content from the database is provided using SPVirutalPathProvider class.
More on SPVirtualPathProvider
http://weblogs.asp.net/scottgu/archive/2005/11/27/431650.aspx
Site pages could exist either in customized(unghosted) or uncustomized(ghosted) state.
For e.g. when we create a new site using one of the default templates, the site as well as pages therin are in uncustomized state i.e. they are based on page templates that live on the file system of the front-end web server. Page template are used for provisioning (creating) page intances. As long as the page is not customized using SharePoint designer or through the Site Settings option the copy of the page is not stored in the content database and the pages are loaded from the file system of the web server. A single page template is compiled into an assembly and loaded into memory of IIS worker process one per web application.
However when page is customized, SPVirtualPathProvider retrieves the customized version of the page from the content database and passes it to ASP.NET parser. Now these pages aren’t compiled into assembly. They are processed by ASP.NET parser in no-compile mode.
No-comiple pages provide higher levels of scalability compared to compiled pages. Compiled pages offer following benefits
•Performance Compiled code is much faster than scripting languages such as ECMAScript or VBScript because it is a closer representation to machine code and does not require additional parsing.
•Security Compiled code is more difficult to reverse engineer than non-compiled source code because it lacks the readability and abstraction of a high-level language. Additionally, there are obfuscation tools that make compiled code even more resistant to reverse engineering.
However these compiled pages cannot be loaded into memory and unloaded in a manner similar to no-compile pages. .NET framework doesn’t support concept of unloading an assembly DLL from memory. By recycling the current Windows process or AppDomain it is possible to unload the dll, the issues is that it would unload all dll’s from memory, not any specific as desired. And moreover there is limit associated with number of assemblies that could be loaded in a .NET AppDomain.
With no compiled pages there is no requirement of loading assemblies into the memory. Processing for compiled pages is done by loading control trees into memory. Once the processing is finished for a customized page, the page’s control tree is unloaded to free up memory resources. And also as the pages are not compiled, it provides faster response time for pages upon first access.
No Compile Pages enables improved scaling for large sites with 1000s of pages, as windows has limit on number of DLLs loaded into an app and perf degrades as you hit this limit.
Application pages are pages that don’t support customization. They cannot be customized using SharePoint designer. E.g. settings.aspx, create.aspx etc.
These pages are deployed at \Layouts directory of 12 hive and are available to all the sites. They are compiled into a single dll and loaded into memory once per web application. They are used extensively for provisioning and administrating sites as well as elements inside the sites. Application pages links to application.master.
So main differences between these two types of pages could be summarized as
1) Site pages support customization whereas application pages don’t.
2) Site pages once customized run in no-compile mode whereas application pages are always compiled.
3) Now as site pages support customization it involves risk so under default security policy enforced by WSS we couldn’t write inline code in it whereas it is allowed to write in-line code in case of application page.
4) Application page scale better than site page.


Description 2:
Site pages are customized pages and are saved in to content database. So when you use the SharePoint designer to make custom changes it saves the changes in to content database. If you want to make generic pages in a site collection which will be used by every one, like for instance the ‘Settings.aspx’ page then you need to use application pages.

In other words Site pages are nothing but customized pages stored in content, while application pages are generic pages which will be used by all the sites in a site collection.