Site templates are used to allow the rapid creation of web sites and basic content in a SharePoint system. Any number of new sites can be generated based on a site template, which is a set of basic content pages and schemas (which are themselves stored on the Web server as a set of HTML and XML files). There can be an unlimited number of site templates, although typically there are basic types and a few templates customized to an organization’s specific requirements.
Site templates are stored in the SharePoint database and can be accessed through template galleries. Once a site template has been created, other users can use that template (or create copies of it for further modification). User-created site templates can be imported to the site collection level, adding them to the site template gallery. Site template files have an “.stp” extension.
Site templates provide several important benefits for site administrators:
They enable you to have a consistent, professional look throughout your portal site.
They provide an efficient way to create subsites and site collections. Individual groups within your organization don't need to set up their sites from scratch, which can be costly and time consuming.
Their use results in a uniform, professional look throughout your portal site that reflects your organization's standards.
Site administrators and designers can create a site template by customizing a site and then saving it as a site template. The site template can be used by others to create sites with the same look and feel. Site collection administrators can also import a site template that was created by another administrator or designer and add the new template to the available site templates in the site collection.
Site templates, compared to site definitions, are easy to create and deploy. You can make all customizations through the user interface or FrontPage 2003. In addition, you do not need to be a server administrator on the Web server to create and deploy site templates. You can modify a site template without affecting existing sites created by the template. Deployment is simple because template data is stored centrally in the configuration database.
Because it is slow to store templates in and retrieve them from the database, site templates can result in slower performance. Templates in the database are compiled and executed every time a page is rendered. Windows SharePoint Services does some performance optimization whereby it stores templates on the local Web server and a copy (or “ghost”) of the page in the configuration database. However, you can easily prevent Windows SharePoint Services from using a copy of the page by using Web Folders or FrontPage to open, modify, and save it. From this point forward, the database is used to render the page. Preventing Windows SharePoint Services from using a copy of a site page will cause the page to stop picking up changes from the site definition files, so if you want to keep a consistent look across the entire portal and only want to modify the site definition files, then don’t prevent this optimization. Rendering pages from the database will result in an initial performance penalty.
Site templates only work on SharePoint sites that are not portal sites (not based on the SPS templates). Furthermore, site templates are not ideally suited for a development environment. In effect, they are still customizations of a site definition. If the site definition does not exist on the server, the site template fails.
Typically, because of these issues, site templates are not as efficient as site definitions in a large-scale environment”
But you should notice that, when you create site out of site template or site definition, and make changes to either of them, will that effect the sites already created out of them? I am still having this confusion