You always could do it both ways: either deploy sources or compile Web into a binary. VS 2003 Web support was built around client projects so it required to user the latter way, i.e. build a binary as all other client projects do. It didn't support 'no compile' model which ASP.NET runtime always supported (along with Web Matrix).
VS 2005 supports both models, simple page deployment which is OK for sites where you don't care about source code (personal sites, Intranet, etc) and compilation into a single binary. 'No compile' model allows team of developers to better share Web server. With binary deployemnt it is impossible for multiple people to work on the Web site at the same time even if they want to work on different pages.
Have a look here:
http://msdn.microsoft.com/library/default.asp?url=/library/en-us/dnvs05/html/codecompilation.asp
Thanks
------------------------------------------------------------
This posting is provided "AS IS" with no warranties, and confers no rights.