Plug-ins can be deployed to the Microsoft Dynamics CRM server’s database or the file system that is known as “on-disk”. We strongly recommend that you deploy your plug-ins in the Microsoft Dynamics CRM database, instead of on-disk, as the primary way to deploy plug-ins for Microsoft Dynamics CRM. Plug-ins stored in the database are automatically distributed across multiple Microsoft Dynamics CRM servers in a datacenter cluster. On-disk deployment of plug-ins is supported for backward compatibility with Microsoft Dynamics CRM 3.0 callouts and also to support debugging of plug-ins by using Visual Studio 2005.
By Asim Sajjad & Bilal Ilyas