In this blog post, Jaime Rodriguez demonstrates theming and how to use it on Windows Phone 7.
A theme is a visual definition of the look & feel for common controls in an Operating System.
Themes are usually end-user selectable, changing the theme at the OS level, impacts the look & feel of running applications that are ‘theme aware’. As an example, on Windows Vista and Windows 7, a popular/desired theme is the Aero theme.