Managed code is code that is written to target the services of the managed runtime execution environment (like Common Language Runtime in .NET Framework). The managed code is always executed by a managed runtime execution environment rather than the operating system directly. Managed refers to a method of exchanging information between the program and the runtime environment. Because the execution of code is governed by the runtime environment, the environment can guarantee what the code is going to do and provide the necessary security checks before executing any piece of code. Because of the same reason the managed code also gets different services from the runtime environment like Garbage Collection, type checking, exception handling, bounds checking, etc. This way managed code does not have to worry about memory allocations, type safety, etc. Applications written in Java, C#, VB.NET, etc target a runtime environment which manages the execution and the code written using these types of languages is known as Managed Code. Managed code is always compiled into an Intermediate Language (MSIL in case of .NET Framework). The compiler used by .NET framework to compile managed code compiles it into Intermediate Language and generates the necessary metadata, symbolic information that describes all of the entry points and the constructs exposed in the Intermediate Language (e.g., methods, properties) and their characteristics. The Common Language Infrastructure (CLI) Standard describes how the information is to be encoded, and programming languages that target the runtime emit the correct encoding.
In .NET Framework Managed Code runs within the .Net Framework's CLR and benefits from the services provided by the CLR. When we compile the managed code, the code gets compiled to an intermediate language (MSIL) and an executable is created. When a user runs the executable the Just In Time Compiler of CLR compiles the intermediate language into native code specific to the underlying architecture. Since this translation happens by the managed execution environment (CLR), the managed execution environment can make guarantees about what the code is going to do, because it can actually reason about it. It can insert traps and sort of protection around, if it's running in a sandboxed environment, it can insert all the appropriate garbage collection hooks, exception handling, type safety, array bounce, index checking and so forth.
Managed code also provides platform independence. As the managed code is first compiled to intermediate language, the CLR's JIT Compiler takes care of compiling this intermediate language into the architecture specific instructions.
Code that is directly executed by the Operating System is known as un-managed code. Typically applications written in VB 6.0, C++, C, etc are all examples of unmanaged code. Unmanaged code typically targets the processor architecture and is always dependent on the computer architecture. Unmanaged code is always compiled to target a specific architecture and will only run on the intended platform. This means that if you want to run the same code on different architecture then you will have to recompile the code using that particular architecture. Unmanaged code is always compiled to the native code which is architecture specific. When we compile unmanaged code it gets compiled into a binary X86 image. And this image always depends on the platform on which the code was compiled and cannot be executed on the other platforms that are different that the one on which the code was compiled. Unmanaged code does not get any services from the managed execution environment.
In unmanaged code the memory allocation, type safety, security, etc needs to be taken care of by the developer. This makes unmanaged code prone to memory leaks like buffer overruns and pointer overrides and so forth.
Unmanaged executable files are basically a binary image, x86 code, loaded into memory. The program counter gets put there and that's the last the Operating System knows. There are protections in place around memory management and port I/O and so forth, but the system doesn't actually know what the application is doing.