Definition :
Application Pages : An application page is deployed once per Web server and cannot be customized on a site-by-site basis.

Site Page : These are pages that make up the site interface and are specific to one site or site collection.

Storage :

Application Pages : They stay in 12 hive folder structure, mostly under layouts folder and aare

used by all the sites and site collections for that server.

Site Pages : They mostly get stored in the content database of the site collection.


Code Behind :

Application Pages : They do support code behind and inline scripts.

Site Pages : They donot support code behinds. We can only add WebPart zones to the site pages.


Look and feel :

Application Pages : They do not inherit websites current master page. They will always inherit from application.master.

Site Pages : They inhertit the custom look and feel of the site.

Examples :

Application Pages : settings.aspx, accessdenied.aspx etc

Site Pages : default.aspx, Allitems.aspx etc.