Bill English has a good posting on a question I also frequently get in my courses:
One of the more common problems that Administrators face when configuring their SharePoint deployment is to adequately guess, in advance, how many web applications should be assigned to a single application pool. By default, the Central Administration UI in Microsoft Office SharePoint Portal Server 2003 asks you to create a new application pool each time you create a new web application. Should you do this? Should each new web application (virtual server) run inside it's own application pool?