Application reference is more like a shell shortcut or .lnk file, which contains a reference to a ClickOnce installed application. This is specific to ClickOnce.
To set the icon file for your ClickOnce deployed application using VS, open the Application Property Page. Set the Icon File property to the icon file you want to use by browsing to the file on disk.
If you are using Mage, select the Files section for the application manifest (.exe.manifest file). Set the type for the icon file you wish to use to 'Icon File'.