In Silverlight 4 with Visual Studio 2010, there are five Silverlight project templates to choose from. Here is a summary of each:
Creates a blank Silverlight project. After selecting this template, a dialog appears asking you to specify whether you want to host the Silverlight application in a new Web site (either an ASP.NET Web Application Project, ASP.NET Web Site, or an ASP.NET MVC Web Project). You can also specify the Silverlight Version (based on the list of Silverlight SDKs installed on your machine), and whether you want to enable WCF RIA Services (discussed below). This template does not implement the Silverlight Navigation Framework (discussed below).
Silverlight Class Library
Creates an empty class library that can be used from a Silverlight application. When you select this template, a dialog appears asking which version of Silverlight you want to target. The resulting solution contains a single project with a single class definition.
Silverlight Business Application
Creates a project that is set up to use both the Silverlight Navigation Framework (discussed under the next template) as well as RIA Services (discussed under the last template).
Silverlight Navigation Application
Creates a project that uses the Silverlight Navigation Framework (http://www.silverlightshow.net/items/The-Silverlight-3-Navigation-Framework.aspx) which allows you to easily navigate between pages in a Silverlight application, as well as interaction with the Browser History journal and provides Uri mapping.
WCF RIA Services Class Library
Creates a solution containing two projects that enable you to create reusable middle-tier and presentation-tier logic. A link exists between the generated Silverlight and middle-tier project that facilitates generating presentation-tier code from middle-tier code. For details, check out this link: http://msdn.microsoft.com/en-us/library/ee707336(v=VS.91).aspx.
Chief Software Architect, MM .NET Application Framework