Templates are associated with DocTypes, typically, and they flesh-out the structure and base for the final XHTML to be delivered to the browser.
Templates are ASP.NET MasterPages, with all the benefits they provide, in particular inheritence and nesting.
Template files can be added directly to the masterpages directory, but you still must go to the Templates node in the Settings section and use the Right-Click context menu to create a template also. If you give a new template the name of an existing masterpage file, the new template will adopt the existing file, and its content.
