what is the use of APP_code folder?

In a Web site project, you can store source code in the App_Code folder, and it will be automatically compiled at run time. The resulting assembly is accessible to any other code in the Web application. The App_Code folder therefore works much like the Bin folder, except that you can store source code in it instead of compiled code. The App_Code folder and its special status in an ASP.NET Web application makes it possible to create custom classes and other source-code-only files and use them in your Web application without having to compile them independently.

The App_Code folder can contain source code files written as traditional class files — that is, files with a .vb extension, .cs extension, and so on. However, it can also include files that are not explicitly in a specific programming language. Examples include .wsdl (Web service description language) files and XML schema (.xsd) files. ASP.NET can compile these files into assemblies.

The App_Code folder can contain as many files and subfolders as you need. You can organize your source code in any way that you find convenient, and ASP.NET will still compile all of the code into a single assembly that is accessible to other code anywhere in the Web application.