What is a SPS area?
Patrick posted an interesting article where he explains what an SPS area is.
He compares an area with your desktop, which in my opinion is a good point of view.
Read also the comments on this article. It tells what some Sharepoint gurus see as the difference between an area and a WSS site.
I want to add to this that whenever you want a topic (read: area or site) to appear in the portal's navigation structure, it should be an area. You can't add a team site to the SPS navigation menu by default (there is a webpart however which displays all sub-sites). Area's are always added to the navigation structure somehow.
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