Libraries are self-contained and can unpack into any prefix. Applications tend to have config files, service description files, documentation, etc. scattered all over the system at specific locations in order to comply with host system conventions and inter-operate with supervisors and other applications.

Wheel is an unpack-into-any-prefix (and stays in that prefix) binary distribution format.

Python libraries are distributed to other Python developers. Applications are distributed to end-users, who may not even know what Python is, let alone details of any Python installation on their machine.

Applications are for the end user. The end user don't need the source code, don't want to compile anything, don't want to bother about installing Python or even knowing it's written in Python, wants it work with his system of choice (app store, package manager, simple exe...), wants OS integration (entry in menus, icons, etc.) and want it fast.

Libs are for the dev: you want the source code, you want to manage versions, you want it to integrate with your dev env, you want a well delimited scope, a way to install it using your usual setup (pip/poetry/etc) and to isolate it from project to project.