Application domains provide a flexible and secure method of isolating running applications.

Application domains are usually created and manipulated by run-time hosts. Occasionally, you may want your application to programmatically interact with your application domains, for example, to unload a component without having to stop your application from running.

Application domains aid security, separating applications from each other and each other's data. A single process can run several application domains, with the same level of isolation that would exist in separate processes. Running multiple applications within a single process increases server scalability.

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An application domain is the CLR equivalent of an operation system’s
process. An application domain is used to isolate applications from one
another. This is the same way an operating system process works. The
separation is required so that applications do not affect one another.
This separation is achieved by making sure than any given unique
virtual address space runs exactly one application and scopes the
resources for the process or application domain using that addess space.

However, a CLR application domain is seperate from a process. It is
contained within an operating system process. A single CLR operating
system process can contain multiple application domains. There are some
major pluses to having application domains within a single process.

• Lower system cost – many application domains can be contained within a single sytem process.
• The application in an application domain can be stopped
  without affecting the state of another application domain running in
  the same process.
• A fault or exception in on application domain will not
  affect other application domains or crash the entire process that hosts
  the application domains.
• Configuration information is part of an application domains scope, not the scope of the process.
• Each application domain can have different security access levels assigned to them, all within a single process.
• Code in one application domain cannot directly access code in another application domain. (* see below)

So you see, the CLR is like a mini-operating system. It runs a
single process that contains a bunch of sub-process, or application
domains.

* Direct communication cannot be acheived across application domains.
Application domains can still talk to eachother by passing objects via
marshalling by value (unbound objects), marshalling by reference
through a proxy (AppDomain-bound objects). There is a third type of
object called a context-bound object which can be marshalled by
reference across domains and also within the context of its own
application domain. Because of the verifiable type-safety of managed
code, the CLR can provide fault isolation between domains at a much
lower cost than an operating system process can. The static type
verification used for isolation does not require the same process
switches or hardware ring transitions that an operating system process
requires.

AppDomain is the logical and physical boundary created around every .Net application within the same application scope—the sequence of object activations starting from the application entry point—by the Common Language Runtime (CLR). The CLR can allow multiple .Net applications to be run in a single process by loading them into separate application domains. To make runtime behavior predictable, the CLR isolates each application domain from all other application domains and prevents the configuration, security, or stability of a running .NET applications from affecting other applications.

AppDomain is the logical and physical boundary created around every .Net application within the same application scope—the sequence of object activations starting from the application entry point—by the Common Language Runtime (CLR). The CLR can allow multiple .Net applications to be run in a single process by loading them into separate application domains. To make runtime behavior predictable, the CLR isolates each application domain from all other application domains and prevents the configuration, security, or stability of a running .NET applications from affecting other applications.

AppDomain is the logical and physical boundary created around every .Net application within the same application scope—the sequence of object activations starting from the application entry point—by the Common Language Runtime (CLR). The CLR can allow multiple .Net applications to be run in a single process by loading them into separate application domains. To make runtime behavior predictable, the CLR isolates each application domain from all other application domains and prevents the configuration, security, or stability of a running .NET applications from affecting other applications.

AppDomain is the logical and physical boundary created around every .Net application within the same application scope—the sequence of object activations starting from the application entry point—by the Common Language Runtime (CLR). The CLR can allow multiple .Net applications to be run in a single process by loading them into separate application domains. To make runtime behavior predictable, the CLR isolates each application domain from all other application domains and prevents the configuration, security, or stability of a running .NET applications from affecting other applications.

AppDomain is the logical and physical boundary created around every .Net application within the same application scope—the sequence of object activations starting from the application entry point—by the Common Language Runtime (CLR). The CLR can allow multiple .Net applications to be run in a single process by loading them into separate application domains. To make runtime behavior predictable, the CLR isolates each application domain from all other application domains and prevents the configuration, security, or stability of a running .NET applications from affecting other applications.