The compiler compiles your m-file(s) into a single executable. The deploytool will also do that but build an installer with it where you can package additional, supporting files and create an installer. Kind of like InstallShield which I'm sure you've seen deployment packages from.
You don't have to use deploytool. I don't. I compile my apps using the compiler's mcc function, then I use a third party package to do the installation. The Mathworks is making improvements to deploytool, but it's just not there yet for me. For example, you can't place your files in any named directory that you want. For example, if you wanted to put a file in c:\users\public\documents\MATLAB\myApp, you can't do it. I may switch to using deploytool if they add features like that which will enable it to compete with third party installer builder applications.
