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Setting Initial Project Areas or Iterations
The project areas are an organizational hierarchy of components and features. When the team project is first created, there usually is no organizational structure to the project. You manually build the tree structure of the project by creating nodes to represent major components and subcomponents, and major features and sub-features. The project areas are then used to organize and display work items into logical groupings.
The project iteration is a process hierarchy of events in the project life cycle. When the team project is first created, the life cycle of the project is expressed in terms of iterations. The default number of iterations is determined by the process template used in creating the team project. For example, the process template for MSF for Agile Software Development establishes a lifecycle with three iterations (0, 1, and 2).