Application Class Loader is the class loader, into which all the classes of an application (process template) are loaded by a single instance of the class loader. By default BP Server is enabled to use application class loader.
The benefit of Application Class Loader is that all the adapters related to a particular application are loaded by a single class loader. However, if one adapter needs to be reloaded, then all the previously loaded adapters also become invalid as a new instance of class loader needs to be created.