What is the difference between a website and a virtual directory?
You're comparing Red Delicious apples to Granny Smiths.
A website is an application served over the internet using the HTTP protocol, primarily consisting of pages holding different types of content (text, images, videos, etc).
A virtual directory is a way that IIS maps a directory on your hard drive to a website. The virtual directory becomes part of the URL. For instance, if you have a web server
www.c_ntoso.com
and it has a virtual directory
foo
that maps to
c:\foo\
on the web server, you can see the web page
c:\foo\bar.html
via the url
www.c_ntoso.com/foo/bar.htm