Site Definition VS Site Template
SITE DEFINITION VS SITE TEMPLATE
Site definition
- A site definition is the basic blueprint for a site, including how it looks, what lists it contains, default navigational structures, and so on.
- A site definition consists of .aspx pages and .xml files with Collaborative Application Mark-up Language (CAML).
- A site definition is installed on file system of web front ends, located at ..\12\Template\SiteTemplates. This directory is language-neutral.
Site template :
- A site template can be created from within the Sharepoint application, A site template (*.stp file) is created through the user interface or through implementation of the object mode (example-taking backup of a site)
- The site template package is a package containing a set of differences and changes from a base site definition
- A site template is based on the underlying site definition, which means that if you create a new site from a template, and later change the underlying site definition, you run the very real risk of irreversibly screwing up your site.
Difference :
| 
Site Definitions | 
Site Templates | 
| Files are on disk, better performance. | Files are in database, less efficient. | 
| Highly customizable and extensible (XML and .NET code is much more flexible than UI) | Not easily extensible (You are limited by what UI offers) | 
| Can provision multiple webs * | Can only provision one web | 
| Complex to create | Easier to create | 
| Requires admin access to server for deploying. | Installable from a Web UI by site owners. | 
| Modifying the site definition after provisioning at least one site from it is not supported and might break existing sites. | Custom templates can be modified without affecting existing sites that have been created from the templates(**). | 
Want to see more about this http://www.dhirendrayadav.com/2010/09/site-template-vs-site-definition.html
 
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