IISReset stops and restarts the entire web server (including non-ASP.NET apps)
Recycling an app pool will only affect applications running in that app pool.
Editing the web.config in a web application only affects that web application (recycles just that app).
Editing the machine.config on the machine will recycle all app pools running.
IIS will monitor the /bin directory of your application. Whenever a change is detected in those dlls, it will recycle the app and re-load those new dlls. It also monitors the web.config & machine.config in the same way and performs the same action for the applicable apps.