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Up until now, your generated projects have been Standalone Help systems, meaning that anyone can double-click the generated CHM file (if it’s HTML Help), or Start Page (if it’s WebHelp or FlashHelp) and the project will start. Application Help simply means that your generated project is intended to work from within a program. There isn’t much you have to do to go from Standalone Help to Application Help, except hand the generated project to the developer.
To demonstrate Application Help, a Web application is included with your data files that needs a generated WebHelp project to work.