Application templates are out-of-the-box custom scenarios tailored to address the needs and requirements of specific business processes or sets of tasks in organizations of any size. They also provide a starting point for partners and developers looking to build deeper SharePoint-based solutions. The templates make use of Windows SharePoint Services 3.0 capabilities and are compatible with Microsoft Office SharePoint Designer 2007 to help make customization easier.
from technet.microsoft.com
http://technet.microsoft.com/en-us/windowsserver/sharepoint/bb407286.aspx
