Also, in terms of Application Server versus Direct Connect, and why ESRI may have decided to make Direct Connect default, it may have to do with a number of (or probably many) clients of ESRI having seen a significant rise in the number of concurrent users using enterprise geodatabases (and not just through cached webservices).
Where in the past for most organizations it used to be that only a few highly active editors / viewers concurrently accessed the database (e.g. maximum a dozen) through ArcMap, now for some shops maybe dozens or even hundreds might access it.
In that scenario, Direct Connect is probably the best option.
However, if you still are within a mid-size organization, with maybe a (few) dozen maximum active users at any point in time, and have a beefy modern 8+ core database server / Application Server with a tens or hundreds of Gigabytes big enterprise geodatabase, than Application Server connections may still be very much a valid choice. In fact, the server with it's specialized high performance hardware and processors (e.g. Xeon), may outperform your desktop in processing the GIS data, especially in cases of network bandwidth constraints.
Also, this remark by D.E.Wright on the GIS StackExchange Forum may be of interest:
�??There are some very good reasons to use an ArcSDE Server Engine (Edit: Should be ArcSDE Application Server in official ESRI terminology), the first being the load. When you utilize a ArcSDE (Edit: Application) Server Service you are taking the bulk of that data load off the database server and queuing it versus relying on just your local machine to store all that temp data.
One thing you will see especially with a MSSQL server when you make your initial database connection in a MXD is that ArcGIS does a 'SELECT *' (as seen in your query analyzer and logs on your DB Server) against that table/feature-class. Now, this can be a huge impact if you have very large datasets; the ArcSDE Service/Process helps in this by aiding in the request of the appropriate data scope.
Now as we have all gotten bigger machines, with more RAM its much easier to just load everything into the current session and run with it; but don't just discount the idea of using the service just because the ArcGIS docs say you 'don't need it' anymore, versus when you probably could/should use it.�?�
