Can someone tell me the maximum number of websites / virtual directories I can host on a single IIS?
Is there's a difference between IIS 6 and IIS 7?
Also what performance and connection limitation should I be worry about.
Here is a semi-official answer from Microsoft regarding IIS7. I have seen things on the web that say IIS6 has no limit as well, but nothing from Microsoft.
As others have stated, there are no hard limits on the number of sites or virtual directories in IIS.
With regard to performance and connection limits, IIS has many configurable parameters that can be changed to suit your particular needs. A good resource for information about IIS 7 (and IIS 6 compatibility) is Microsoft's IIS.net site (in particular, the Learn section).