Alex Golesh has published two blog post about the push notification mechanism in Windows Phone 7. In the first part he demonstrates how to build the server part of the push notification mechanism, while in the second one he shows how to handle push notifications on the phone.
Windows Phone 7 application can’t run in the background (performance, battery life, usage of radio) and therefore there is a need to have a mechanism that facilitates a communication channel between backend services and application on the phone. Push Notification is the mechanism through which backend services can send “messages” to the phone to notify the user for any state changes. The Push Notification service is designed to provide a cloud service with a dedicated, resilient, and persistent channel for pushing a notification to a mobile device.