How does XAP work in silverlight?

Once you have created the .xap file (explained below), the Silverlight 2 or 3 plug-in downloads the file and runs it in a separate work space. (More...)

A basic xap file in silverlight will have an assembly related to specific code for the application, an application manifest file and any additional assemblies need to run the application. At a minimum, two files are needed, the application manifest file and the application assembly. For example:

AppManifest.xaml
MyPianoV2.dll

Once you have created the .xap file, the Silverlight 2 or 3 plug-in downloads the file and runs it in a separate work space.

A .xap file is used to contain and transfer the assemblies and resources of a managed code application. This managed code application must be run within the Silverlight 2 browser plug-in. (More...)

A basic xap file in silverlight will have an assembly related to specific code for the application, an
application manifest file and any additional assemblies need to run the application. At a minimum, two files are
needed, the application manifest file and the application assembly. For example:
AppManifest.xaml
MyPianoV2.dll
Once you have created the .xap file, the Silverlight 2 or 3 plug-in downloads the file and runs it in a separate
work space. (More...)

The CAS security policy revolves around two key concepts - code groups and permissions. Each .NET assembly is a member of a particular code group, and each code group is granted the permissions specified in a named permission set.
For example, using the default security policy, a control downloaded from a web site belongs to the 'Zone - Internet' code group, which adheres to the permissions defined by the 'Internet' named permission set. (Naturally the 'Internet' named permission set represents a very restrictive range of permissions.) (More...)

There is no hard and fast rule to start Silverlight application. Every developer can start as per his/her experience.
like as per my case I always prefer Visual Studio. SO, in my view Visual Studio is the best place to start with Silverlight2 applications.Microsoft provides
templates for creating Silverlight applications and libraries in C#
and Visual Basic. (More...)

You can find a fully described article from http://www.silverlightclub.com/resources/1858-silverlight-lets-start-building-applications.aspx.aspx
In the following step(s) I am giving the ideas all about:
1.Create a project:Here you just start your visual studio, Select your programming language [C#/VB], Choose Silverligh Template give the name and save it
2. Adding SIlverlight COntrols:One thing is happened here, controls cannot dragged onto the designer, you can draw/drag the controls on XAML page.
(a) Naming to control:In this step just give the name to your silverligt control like for Button you can give name as : btnmySilverligtButton
(b)Adding event handlers to Silverlight controls:Here you can give the event handlers like for click etc.
(c)Testing Silverlight applications in Visual Studio:Now just press F5 and test your application (More...)

When you run the Silverlight application within Visual Studio, a new folder created in the web-site project for silverlight solution and it happened only first time. The folder name is ClientBin and having package with XAP extension which contains compiled project. (More...)

As I am from .Net background so in my views you can get C# / Vb.net compiled code but in Flash there is only action script.
You can find difference in depth at : http://silverlight.net/forums/t/3015.aspx (More...)

Yes, you can have multiple .xaml files in a single project.

In the App.xaml, in the method Application_Startup you can choose, which page you want to

initially display. (More...)

To create an application or game you need to design, code and give some extra feature to your output.

To do the above, you need some controls, IDE etc.

Silverlight Tool kit is nothing but is a collection of Silverlight Tools, Components etc. It includes source code describing the all you need to develop an application.

Please visit this link for more info:http://www.codeplex.com/Silverlight (More...)