N denotes that the subsequent string is in Unicode, means National language character set.

When you use unicode you mast have Nvarchar/Nchar ...

Index will be used anyway, but there are some performance issues in case when

for example

TABLE1 you have created index on columnA which is varchar type,

TABLE2 you have created index on columnB which is Nvarchar type

join this two tables

select * from TABLE1 a join TABLE2 b on a.coumnA = b.columnB

view execution plan

after this, second case

alter TABLE1 alter column columnA Nvarchar

do the same select, view execution plan

you will see deference.