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Full Definition

Definition from http://office.microsoft.com/en-us/sharepoint-designer-help/save-a-sharepoint-site-as-a-template-HA101782501.aspx

SharePoint site templates are pre-built definitions designed around a particular business need. You can use these templates as they are to create your own SharePoint site and then customize the site as much as you like. You’re probably familiar with the default site templates, like Team Site, Blog site, and Group Work Site as shown here.

In addition to the default templates, you can create your own site template based on a site you’ve created and customized in SharePoint. This is a powerful feature in SharePoint that allows you to create a custom solution and then share that solution with your peers, the broader organization, or outside organizations. You can also package the site and open it in another environment or application like Microsoft Visual Studio and further customize it there.

When you save your site as a template, you create a Web Solution Package, or WSP. A WSP is a CAB file with the solution manifest. The solution you create gets stored in the Solution Gallery for the SharePoint site collection. From there, you can download a copy of the solution or activate it on the server.

Types of Questions

Default site templates
Customizing site templates
Deploying / Utilizing site templates
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