I found that all the app bar icon button has round layer, I know it is drawn by the App bar only; but my question is, can we make any other shapes like square or is there any alterations to do that.

can we able to draw any other shapes instead of that circle in the above image.
Nope, you’re stuck with the circle unless you roll-your-own
ApplicationBar-lookalike.Charles Petzold’s Programming Windows Phone 7 hints at this on pages 232-233:
Whilst the icons in
C:\Program Files (x86)\Microsoft SDKs\Windows Phone\v7.1\Icons\have the circles around them, the circles are excluded by the ’26-pixel square area’, and are re-added by theApplicationBar. Thus, the circles are unable to be changed.