Suppose I am using Microsoft IIS, when we request a aspx page, it is processed at server side & html response is generated for the client, but if we request for an exe or any other file, server does not processes anything, it simply sends the requested file to the client, & we can download that file as a popup is generated in IE which has option for Save to Disk.

My question is that, what HTTP method is used to directly return the requested file to the client without processing anything.

Well, HTTP is doing exactly what it does, it will allow them to download exe files but it can't and doesn't "process" them.

Since .exe mean executable file and not a displayable file the only thing the WEB server can do is let the client download the file so that the client can then execute that file.

Hyper Text Transfer Protocall ( HTTP) can only send "text type" output! That is what it outputs, it can not RUN exe files.

try this i might help www.w3schools.com/default that explains all that for you

I am not too sure of this answer, as I do not use microsoft webservers but apache and lighttpd, however, if i was to return a script to the browser, I would just change its permissions so that the server won't execute it. Try doing the same, it might work.

EXE file can be processed by IIS simply tagging this as CGI request. Some compiler (like Delphi Websnap) uses EXE file as CGI file. IIS will check if the EXE is a CGI type or an executable