The code stays on the server, provided the folder is marked as execute but not read. The only thing they get to see is the HTML generated by yout srcipt. There is very little you can do to stop them from reading this.
I'm actually developing an application for my client(an intranet type pf applicetion). This is going to install in my client side, can I compile my ASP codes to any of the unreadable format from my client.