Good example of use of AppDomain

I think the main motivation for having AppDomains is that the CLR designers wanted a way of isolating managed code without incurring the performance overhead of multiple Windows processes. Had the CLR been originally implemented on top of UNIX (where creating multiple processes is significantly less expensive), AppDomains may never have been invented.

Also, while managed plug-in architectures in 3rd party apps is definitely a good use of AppDomains, the bigger reason they exist is for well-known hosts like SQL Server 2005 and ASP.NET. For example, an ASP.NET hosting provider can offer a shared hosting solution that supports multiple sites from multiple customers all on the same box running under a single Windows process.

Another benefit of AppDomains (as you mentioned in your question) is code that you load into it can run with different security permissions. For example, I wrote an app that dynamically loaded DLLs. I was an instructor and these were student DLLs I was loading. I didn't want some disgruntled student to wipe out my hard drive or corrupt my registry, so I loaded the code from their DLLs into a separate AppDomain that didn't have file IO permissions or registry editing permissions or even permissions to display new windows (it actually only had execute permissions).

Probably the most common one is to load assemblies that contain plug-in code from untrusted parties. The code runs in its own AppDomain, isolating the application.

Also, it's not possible to unload a particular assembly, but you can unload AppDomains.

For the full rundown, Chris Brumme had a massive blog entry on this:

http://blogs.msdn.com/cbrumme/archive/2003/06/01/51466.aspx

https://devblogs.microsoft.com/cbrumme/appdomains-application-domains/