What exactly is an application pool? What is its purpose?
See Question&Answers more detail:osApplication 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