Application pages are a pain. They exist inside the _layouts directory, and are common to all the files across the farm. This makes them difficult to change, as such changes happen thoughout the system, not just one site or site collection. They’ve also got their own master page – and it’s difficult to change, which often you want to when branding a system. Essentially, you should try not to need a new master page (application pages can be modified by Themes, so that’s one way of branding them).
So what is an application page? Well, it’s a standard ASPX page. They’re usually for site administration type tasks, though there are a number of pages that users are likely to see regularly that are also application pages – such as file upload, the recycle bin and the “View all a site contents” page. Therefore, there is a problem – you can brand up your SharePoint Site, but if a user tries to upload a file they’ll drop out of that branded experience. For example, this example shows a SharePoint Site using a custom Master page (background window), but if you try to upload a document to that site you’ll see a standard upload page (foreground window). If you look in the URL for the upload page, you’ll notice it’s in the _layouts directory:
Like I say, you can change the style of this window through themes, but really that means just changing the colours – changing the structure of the page is much, much harder. Below is an example of changing the Site’s appearance through themes – you can see that this applies to the upload page too.
You shouldn’t change application pages themselves, as they are core to SharePoint and you won’t be supported by Microsoft – but you can add your own, should you want to present your own farm-wide administration pages.