Difference Project and Web Site

[Webskater]

What is the difference between a Project and a Web Site. In Visual Studio it offers File | New Project ... and File | New Web Site

As what I develop are going to be web sites, I choose File | New Web Site

But ... I have a number of web sites that all access the same database and within each web site I have a lot of duplicated functionality - like GetContact(int ContactID), GetNotes(int JobID) etc. etc.

Can I keep all the common code in one place and access it from each web application? I have the idea that this is what a 'Solution' is for, with the ability to add various Projects to a Solution.

But, if you create a web site (as opposed to a project) you don't seem to be able to reference another project. Can you?

Thanks for any help.