The terms "neighborhood school," "school of residence," or "home school" are often used interchangeably by school districts, parents and others. A child's "school of residence" is the specific school site that he or she would attend if not disabled. "School of residence" is determined by a district procedure that is used to determine what school each child in the district is assigned to, usually it is determined geographically according to the address of the parents. This is the school you would enroll your child in if there wasn't an IEP in the mix.
There is no absolute requirement that children attend their school of residence, even if they are fully included in a general education setting. The choice of appropriate placement depends on the child's unique needs as determined by the IEP team. Some school districts have policies that require all kids with IEPs who are placed in general education to be placed in their home school. Although this may be beneficial to some kids, there are parents who have concerns about the lack of an individualized decision in these situations. On the other hand, many parents may be in a school district that does not have such a policy, but instead may have a practice of grouping kids with IEPs at particular school sites that have inclusion support and other services. Parents in those districts may be concerned about the fact that their child then cannot be included in their "neighborhood school" with kids from their community.
Ultimately, parents have to be included in any team that is making placement decisions about their child. A child's school of residence is one placement consideration on the continuum of available options, and parents should think about the positive benefits of placement in the neighborhood school and discuss these benefits with the team.