Sun Java System Web Server 7.0 Update 4 Developer's Guide to Java Web Applications

Servlet by Extension of Servlet by Directory

Servlet extension is not supported in Web Server. You can deploy a web application to respond to a directory, but all of the servlets must be in the WEB-INF/classes directory of the web application. You can no longer copy a servlet in the .class file into the document tree and have it run as a servlet or have all of the contents of a directory run as a servlet. The web application treats only .class files as servlets.