A Web application is a logical unit that you can use to group files and directories in a logical unit and that can contain multiple subdirectories. An application might have certain settings (e.g., enabling/disabling Active Server Pages—ASP—session state, enabling/disabling ASP buffering) that apply only to itself. You can convert any directory—virtual or physical—to a Web application. To do so, open the directory's Properties dialog box, go to the Virtual Directory tab, click Create, then click OK. The object's icon in the Microsoft Management Console (MMC) Internet Information Services console changes to the Web application icon. After you've converted a directory, a Remove button replaces the Create button; you can click this button to convert the application back into a directory.

You can configure an entire Web site (e.g., the Default Web Site) as an application. Virtual directories inherit application protection (i.e., Medium, High, or Low) from the parent application, so in the case of the Default Web Site, any virtual directory will inherit application protection from the root web site. Individual applications, however, set their own protection level. When set to run in High protection, all components of that application only—such as ASP pages, ActiveX DLLs used in ASP pages, and standalone Internet Server API (ISAPI) extension DLLs—will run in a single process, outside of inetinfo.exe. To accomplish such process isolation, IIS creates a COM+ package that runs in the surrogate process dllhost.exe. (Note that the Application Protection and Configuration settings are disabled until you convert a directory to an application.)