What is ASP.NET Application Domain?02-11-2013
An Application Domain is the logical and physical boundary created around every .NET application by the Common Language Runtime (CLR).
One web application runs in a single Application Domain but may communicate via web/remote services with applications in other domains.
The CLR may allow multiple .NET applications to be run in a single Application Domain, so it means that an Application Domain may be shared by different applications which can in that case communicate with each other "directly".
Most times though, the relationship between a web application and an application domain is one-to-one.
You may read the following article (very short, but nicely written) which explains what are Application Domains and how they may be useful: http://www.beansoftware.com/NET-Tutorials/Application-Domain.aspx.
Also, on his blog, Scott Forsyth explains the differences between an application (IIS term), a web application (ASP.NET term) and application domains.