Option 1 means that you are responsible to provide a server that serves at 
least the static files GWT Development Mode produces (all files stored at 
the location of the -war / -launcherDir parameter). If you also have server 
side code your server would also need to serve that code as well. It's 
basically the "serve your files yourself" mode.

Option 2 does what Option 1 does not: It provides an embedded jetty to 
serve static files as well as servlets.

-- J.

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