The difference is in the length of their existance.
An application variable exists from when the application is first 'run' (The first time a page in the app is used) and exists until the application is stopped on the server, either through IIS or the actual machine being turned off or rebooted.
A session variable is created for the instance of the browser accessing the site and will only be available until that browser is closed or the session times out.
Rod
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They say, best men are moulded out of faults,
And, for the most, become much more the better
For being a little bad.
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