One of the neat new features of ASP.NET 2.0 is the ability to develop web sites that exist simply as a folder within the file system...no IIS vdir, no admin privileges required, very simple. Browsing and debugging are accomplished using a local-only web server based on the Cassini web server that shipped with ASP.NET Web Matrix.
There are some tricks to this, however. Notably, things like authentication when calling web services. If you've tried calling a local file system based web service from a local file system based web site, you know what I mean. Attempting to call the web service results in a 401: unauthorized error.
Marcel de Vries describes a way to work around the issue here.