nvarchar supports unicode data and so it's supports a wider range of characters, code pages. The storage is twice the size of varchar. You can find more information on unicode data in books online:
http://msdn2.microsoft.com/en-us/library/ms191200.aspx
-Sue
|||Books Online is a great resource. You should have a copy to consult for questions such as this.
Get your copy here. Online version here.
varchar() is variable length character data,
nvarchar() is variable length character data in UNICODE form.
UNICODE requires two bytes per character, and allows the storage and retreival of cunniform and script based languages, such as Thai, Chinese, Japanese, etc.
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