What are private assemblies and shared assemblies?

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A private assembly is used only by a single application, and is stored in that application's install directory (or a subdirectory therein). A shared assembly is one that can be referenced by more than one application. In order to share an assembly, the assembly must be explicitly built for this purpose by giving it a cryptographically strong name (referred to as a strong name). By contrast, a private assembly name need only be unique within the application that uses it.
By making a distinction between private and shared assemblies, we introduce the notion of sharing as an explicit decision. Simply by deploying private assemblies to an application directory, you can guarantee that that application will run only with the bits it was built and deployed with. References to private assemblies will only be resolved locally to the private application directory.
There are several reasons you may elect to build and use shared assemblies, such as the ability to express version policy. The fact that shared assemblies have a cryptographically strong name means that only the author of the assembly has the key to produce a new version of that assembly. Thus, if you make a policy statement that says you want to accept a new version of an assembly, you can have some confidence that version updates will be controlled and verified by the author. Otherwise, you don't have to accept them.
For locally installed applications, a shared assembly is typically explicitly installed into the global assembly cache (a local cache of assemblies maintained by the .NET Framework). Key to the version management features of the .NET Framework is that downloaded code does not affect the execution of locally installed applications. Downloaded code is put in a special download cache and is not globally available on the machine even if some of the downloaded components are built as shared assemblies.
The classes that ship with the .NET Framework are all built as shared assemblies.
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