I might even add a new term to your query: "Portlet application"
An application itself can be anything. In the Windows world, it's an executable. On the web, it's probably a bunch of
Servlets and JSPs working together.
On the portal, we use the term portal application. A portal or portlet application would be multiple individual portlets that are packaged in a common war file, that together provide a common user experience. So, a tax preparation portlet application might have a few portlets: one that helps you do your taxes, another that shows you retirement investment plans, another that provides tax savings tips, and another that provides various payment schedules for loans or mortgages. It is very conceivable that a tax planning application might have these various features. On the portal, each would be provided as perhaps an individual portlet, or window, that provides specific details, but can work with other portlets that are part of a portal application.
Having said that, a portal page might have portlets from varios different portlet applications. Just look at facebook or a yahoo portal. Those pages have many portlets providing information, although each individual portlet might be packaged and deployed in a separate war, aka portal application.
-Cameron McKenzie