Ideally, I would want to configure our Azure Web App application settings using build variables (on VSTS), for example:
We perform our publish tasks using P
Build Variables are automatically passed to all the PowerShell scripts as environment variables.
So if you have defined a variable myVar in the Variables section. You can access it as $env:myVar in your script. One thing to note here is that . is converted to a _. For eg. if your variable is myVar.config, you will access it in your script as $env:myVar_config.
The available variables also include variables such as branch name, build number etc. To see all the available variables, run a dummy build/release definition and add a PowerShell task with inline type and run Get-ChildItem Env:. This will show you all the available environment variables and you can see all your custom defined variables.
More details are available here