We use quantum Monte Carlo (QMC) simulations to study the combined effects of harmonic confinement and temperature for bosons in a two dimensional optical lattice. The scale invariant, finite temperature, state diagram is presented for the Bose-Hubbard model in terms of experimental parameters -the particle number, confining potential and interaction strength. To distinguish the nature of the spatially separated superfluid, Mott Insulator and normal Bose liquid phases, we examine the local density, compressibility, superfluid density and Green's function. In the annular superfluid rings, as the width of the ring decreases, the long range superfluid correlations start to deviate from an equivalent homogeneous 2D system. At zero temperature, the correlation decay is intermediate between 1D and 2D, while at finite temperature, the decay is similar to that in 1D at a much lower temperature. The calculations reveal shortcomings of the local density approximation (LDA) in describing superfluid properties of trapped bosons. We also present the finite temperature phase diagram for the homogeneous two dimensional Bose-Hubbard model. We compare our state diagram with the results of a recent experiment at NIST on a harmonically trapped 2D lattice [Phys. Rev. Lett. 105, 110401 (2010)], and identify a finite temperature effect in the experiment.