How can I exclude a specific file from TFS source control

Select the App.config file in Solution Explorer, and choose File -> Source Control -> Exclude App.config from Source Control.

There is a checkin policy (Forbidden Patterns Policy) in the MS Power Tools which lets you screen filenames against a regular expression. See: Microsoft Team Foundation Server Power Tools

While checkin policies are not completely foolproof, they are the closest thing TFS has to enforcing user-defined rules like what you're looking for.

(And as the others have said, you can also cloak a file or folder, which means it stays in Source Control and is visible to everyone else on the team, but it's not copied to your PC until you decide to uncloak it; or you can delete the file, which means it gets deleted from everybody's PCs when they get latest - but neither of these options will prevent such files being added to source control in the first place)

It's easy in TFS2012, create a .tfignore file

http://msdn.microsoft.com/en-us/library/tfs/ms245454%28v=vs.110%29.aspx#tfignore

######################################
# Ignore .cpp files in the ProjA sub-folder and all its subfolders
ProjA\*.cpp
# 
# Ignore .txt files in this folder 
\*.txt
#
# Ignore .xml files in this folder and all its sub-folders
*.xml
#
# Ignore all files in the Temp sub-folder
\Temp
#
# Do not ignore .dll files in this folder nor in any of its sub-folders
!*.dll

# EDIT https://msdn.microsoft.com/en-us/library/ms245454(v=vs.110).aspx#tfignore
# A filespec is recursive unless prefixed by the \ character.