Hmm. Guess my only concern is that that answer might not have been clear given that Web Deployment is the subject of the forum.
Creating a setup.exe or an MSI is not required to deploy a Web Application especially within a corporation, and as both Scott and I stated, it is an optional step. I think that the original questioner may have been asking about Web Deployment, the add-in, versus Publishing, the built in feature, but only he can say for sure.
To clarify, if I create a Web Deployment project and set its "Output Directory" in its property pages to a UNC path on the server that it is going to reside on, be it a staging server or a production server, it is in fact "deployed" just by building the Web Deployment project in the current configuration (it may also require creating the IIS Application, but that's another matter). You can also build it locally and put in an AfterBuild Project Target to do an xcopy to the remote server. And lastly you can just use an external process to manually or automatically xcopy to the destination. All of these and more are "deployment" without an MSI file. The difference in Publish vs Web Deployment is in what you are moving to the server because Web Deployment gives you far more options like number of DLL's, etc.
As well, I do not need a Web Deployment project at all to create a Setup project. It is independent of whether it takes its output from a Web Application project or a Web Deployment project. The only difference is in what it installs.
Thus, IMHO, a Web Deployment project needed to be differentiated as something separate from a Setup project.
Hope that clarifies enough for anyone, to do their own further investigation.