• Option 1 - ASP.NET Web Application
• Option 3 - ASP.NET Core Web Application

Although both project templates use Full .Net Framework, Option 1 is for creating projects using legacy version of ASP.NET MVC in which we can use Global.asax.

Option 3 is totally new concept in which wwwroot folder, using task runners and everything is through OWIN middleware.

A lot of organization and companies are not ready to jump into new project template yet. I believe Option 1 is there for backward compatibility.