Web.config transformations are part of the new web publishing (WPP) in Visual Studio 2010.
During the build process, the "CopyWebApplication" target is executed to copy the website to the _Websites folder in the assembly output directory. Due to backward compatibility reasons, MSBuild uses the "old" (VS2008) copy behavior by default, rather than the new WPP system.
To opt out of using WPP, set the following MSBuild properties:
/p:UseWPP_CopyWebApplication=True /p:PipelineDependsOnBuild=False
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