I am not going to cover the territory of the web application because it is not your question, therefore throughout this answer I will use the terms web application or virtual directory interchangeably. If you want to know more about what a web application is in IIS, then this article is from the official MS website on IIS: Understanding Sites, Applications, and Virtual Directories on IIS 7 . Although the name speaks of IIS7, it also delves into IIS6.
What web application are we requesting
Keeping this simple, the request you make to the server contains the virtual directory included in it, or IIS is already configured to map the request to a specific virtual directory. If your requested URL looks like this:
http://someServer/myWebSite/default.aspx
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