--This first line will return an error
--UPDATE tablename SET	 = 'N'


--Commenting the UPDATE to transform into SELECT
--UPDATE T1 SET 
--          [coumnname] = CASE WHEN T2.[Application ID] IS NOT NULL AND T2.[ServerName] IS NOT NULL AND [colname2] <> 0 THEN 'Y' ELSE 'N' END
SELECT T2.[Application ID], --It's recommended not to use spaces for column/object names
     T2.[ServerName],
     colname2
FROM tablename T1
LEFT JOIN tablename2 T2 ON (T1.[Application ID] = T2.[Application ID] AND T1.[ServerName] = T2.[ServerName]) 
WHERE T2.[Data Period] = 'September 2012'
--Uncomment to be sure there're records that comply
--AND T2.[Application ID] IS NOT NULL
--AND T2.[ServerName] IS NOT NULL
--AND  [colname2] <> 0 

SELECT 
	T2.[Application ID]
	, T2.[ServerName] 
	,[TB Billed This Month] 
	,CASE WHEN T2.[Application ID] IS NOT NULL AND T2.[ServerName] IS NOT NULL AND [TB Billed This Month] <> 0 THEN 'Y' ELSE 'N' END
FROM TableName1 T1
LEFT JOIN TableName2 T2 ON (T1.[Application ID] = T2.[Application ID] 
AND T1.[ServerName] = T2.[ServerName]) WHERE T2.[Data Period] = 'September 2012' 

UPDATE T1 SET [September 2012 Billing File] = CASE WHEN T2.[Application ID] IS NOT NULL AND T2.[ServerName] 
IS NOT NULL AND [TB Billed This Month] <> 0 THEN 'Y' ELSE 'N' END
FROM TableName1 T1
LEFT JOIN TableName2 T2 ON (T1.[Application ID] = T2.[Application ID] 
AND T1.[ServerName] = T2.[ServerName]) WHERE T2.[Data Period] = 'September 2012' 

SELECT 
	T2.[Application ID]
	, T2.[ServerName] 
	,[TB Billed This Month] 
	,CASE WHEN T2.[Application ID] IS NOT NULL AND T2.[ServerName] IS NOT NULL AND [TB Billed This Month] <> 0 THEN 'Y' ELSE 'N' END
FROM TableName1 T1
LEFT JOIN TableName2 T2 ON (T1.[Application ID] = T2.[Application ID] 
AND T1.[ServerName] = T2.[ServerName]) WHERE T2.[Data Period] = 'September 2012'