Quick tip! If you've upgraded to Windows 8, you'll get an error when trying to run your W7 Phone Emulator:
There's a quick solution! Download the WP7 SDK 7.1.1 from https://dev.windowsphone.com/en-us/downloadsdk. This update allows for multiple different options when running your app, which is pretty cool, and is especially cool if you're interested in game performance on various WP devices.