In IIS if you set up a folder as a web site (globe Icon), right click on the website and go to properties and then the "web site" tab and then select advanced next to the ip box and you can set domain names to IP addresses. While in properties, under the "home directory" tab you can set where the home directory is on your hard disk.
If you want to add a Virtual Directory to a website then you can right click on a website, select virtual directory and point it to a folder on the disk. I think you may have this confused because in IIS microsoft terms a virtual directory is basically a shortcut to a folder outside of the home directory.
For example say your home directory is
C:\inetpub\wwwroot
You want to add a folder thats on the D drive
D:\testfolder
In IIS you would set "testfolder" as a virtual directory
While "testfolder" is not actually in wwwroot, it would funtion like it was.
So if "
http://localhost" was your default webpage, "
http://localhost/testfolder" would be a virtual directory even though testfolder is not in the C:\inetpub\wwwroot directory
Its not as confusing as its sounds
