Classic mode is where IIS only works with ISAPI extensions and ISAPI filters directly. This is how IIS 6 and below behaved. Using classic mode, ASP.NET is simply an ISAPI extension (aspnet_isapi.dll) and an ISAPI filter (aspnet_filter.dll). When using classic mode the server uses two piplines to handle requests, one for native code and the other for managed code. In this mode the application doesn’t take full advantage of everything IIS 7.X has to offer.
Integrated mode handles all requests through a unified pipeline for IIS and is tightly integrated with ASP.NET through that same pipeline. ASP.NET sees every relevant request and manipulates things along the way rather than acting as an external plugin. With integrated mode ASP.NET runs much more efficiently in IIS and will yield greater performance for your site.