Quoting Wikipedia:
The file URI scheme is a URI scheme specified in RFC 1630 and RFC
1738, typically used to retrieve files from within one's own computer.
and RFC 1738:
The file URL scheme is used to designate files accessible on a
particular host computer. This scheme, unlike most other URL schemes,
does not designate a resource that is universally accessible over the
Internet.
A file URL takes the form:
file://host/path
where host is the fully qualified domain name of the system on which
the path is accessible, and path is a hierarchical directory path
of the form directory>/directory/.../name.
As a special case, host can be the string localhost or the empty
string; this is interpreted as `the machine from which the URL is
being interpreted'.
Most browsers support file:// URI, co you can open file from your disk by using them in your browser address bar.
I don't think that application:// URI is standarized - there is no info about it on Wikipedia and in RFC's on IETF site and in IANA site, so usage of this URI scheme is rather application specific and designed for application internal needs.