What is an IIS application pool?

Application pools allow you to isolate your applications from one another, even if they are running on the same server. This way, if there is an error in one app, it won't take down other applications.

Additionally, applications pools allow you to separate different apps which require different levels of security.

Here's a good resource: IIS and ASP.NET: The Application Pool

I second the top voted answer, but feel like adding little more details here if anyone finds it useful.

short version:

IIS runs any website you configure in a process named w3wp.exe. IIS Application pool is feature in IIS which allows each website or a part of it to run under a corresponding w3wp.exe process. So you can run 100 websites all in a single w3wp.exe or 100 different w3wp.exe. E.g. run 3 websites in same application pool(same w3wp.exe) to save memory usage. ,run 2 different websites in two different application pools so that each can run under separate user account(called application pool identity). run a website in one application pool and a subsite 'website/app' under a different application pool.

Longer version:

Every website or a part of the website,you can run under an application pool.You can control some basic settings of the website using an application pool.

1. You would like the website to run under a different w3wp.exe process.Then create a new application pool and assign that to the website.
2. You would like to run the website and all it's code under a different user account(e.g under Admin privileges),you can run do that by changing Application Pool Identity.
3. You would like to run a particular application under .net framework 4.0 or 2.0.
4. You would like to make sure the website in 32 bit mode or have a scheduled recycle of the w3wp.exe process etc.All such things are controlled from iis application pool.