West workspace is a collection of directories that are jointly version-controlled using the west management tool. A west workspace is indicated by a .west directory that contains the west workspace configuration.
Typically, when working with workspace applications, your west workspace will also be a VS Code workspace.
West workspaces allow you to set a dedicated SDK around your freestanding application. This introduces a project directory above the application repository, where the SDK and other dependencies are instantiated. The project directory above the application repository becomes the manifest repository directory, which is controlled by a west manifest file. As a result, your application always builds against the chosen dedicated version of the SDK.
On the following image, you can see an EXAMPLE-APPLICATION west workspace that includes the application source directory (example-application, which is also a Git repository) and the project directory .west above the application source directory, which was created when the workspace was initiated.
For more information about west workspaces, read Zephyr's West Basics documentation page.