9b3eafd4_dio__that_is_the_the_question___SharePoint_Designer_2007
Compiles the workflow compiled into an assembly and deployed to the server. [SharePoint Designer 2007] 
Everything is persisted in markup and stored in a document library in the target site.
Andrew Connell, MVP SharePoint Server - Authoring workflows in WSS v3 - to use SharePoint Designer or Visual Studio, that is the the question!
SharePoint Designer 2007