In .NET, programs are not compiled into executable files, they are compiled into Microsoft Intermediate Language (MSIL) files, which the CLR then executes. The MSIL (often shortened to IL) files C# produces are identical to the IL files that other .NET languages produce; the platform is language-agnostic. A key fact about the CLR is that it is common: the same runtime supports development in C# as well as in VB.NET.
C# code is compiled into IL when you build your project. The IL is saved in a file on disk. When you run your program, the IL is compiled again, using the Just In Time (JIT) compiler (a process often called JITing). The result is machine code, executed by the machine's processor.
The standard JIT compiler runs on demand. When a method is called, the JIT compiler analyzes the IL and produces highly efficient machine code, which runs very fast. The JIT compiler is smart enough to recognize when the code has already been compiled, so as the application runs, compilation happens only as needed. As .NET applications run, they tend to become faster and faster, as the already compiled code is reused.
The CLS means that all .NET languages produce very similar IL code. As a result, objects created in one language can be accessed and derived from another. Thus it is possible to create a base class in VB.NET and derive from it in C#.