Silverlight 1 is purely AJAX and Javascript based. All the code has to be written in Javascript and XAML.
Silverlight 2 supports managed code. When Silverlight 2 runtime is installed, it installs a limited version of .NET runtime on the client machine. This allows .NET programmers to write managed code to be executed on the client PC and provide a better user experience to the users. Of course, there is security and restrictions built in to it so that the code has limited access to the client computer.
Developers must be aware that if the end user decline to install the .NET runtime on their client computer, the Silverlight 2 applications will not run
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