One of the simplest explanation i found is from the Suresh Rajamickam blog, find this http://sureshrajamanickam.blogspot.in/2011/12/apppool-vs-appdomain.html
Application pools are used to separate set of IIS worker processes that share the same configuration. Applicationpools enable us to isolate our web application for better security, reliability, and availability. The worker process serves as the process boundary that separates each application pool so that when one worker process orapplication is having an issue, other applications or worker processes are not affected.
Application pool and AppDomain both of them can provide isolations.
Application Pool is in IIS whereas AppDomain is a in .NET.
Application pool use the process to isolate the applications which works without .NET.
AppDomain is another isolation methods provided by .NET.
An AppDomain contains InProc session state.So if an AppDomain is killed/recycled, all of your session state information will be lost.
Applications can have multiple AppDomains in them although often times there is a one-to-one relationship between them.
Chaitanya Pai 