What is XAP file?

XAP (pronounced as ZAP) is the compressed output of the Silverlight Application which includes application manifest file, compiled output assembly and other resources used by your silverlight application. This uses the normal ZIP compression method to reduce the total download size. When you build your Silverlight application, it actually generates this .XAP file & puts in the output folder which the .aspx page refers as source to load the application.
Once you build your project, it will create the XAP file (in our case: SilverlightApps.HelloSilverlight.xap) and put it into the ClientBin directory of the web project. When the page loads it will pickup from the same location as the source you specified inside the aspx/html page.