In order for your Web application to service requests, ASP.NET must first parse and compile the code of your Web application into one or more assemblies. When the code is compiled, it is translated into a language-independent and CPU-independent representation called Microsoft Intermediate Language (MSIL). At run time, MSIL runs in the context of the .NET Framework, which translates MSIL into CPU-specific instructions for the processor on the computer running the application.
ASP.NET dynamic compilation enables you to modify your source code without having to explicitly compile your code before you deploy your Web application. If you modify a source file, ASP.NET automatically recompiles the file and updates all linked resources. The IIS server does not have to be restarted for the changes to take effect unless the <processModel> section has been changed.
You can extend the ASP.NET build system by creating custom build providers for new file types that are called during compilation.
source: http://msdn.microsoft.com/en-us/library/ms366723.aspx
