In this post, Yochay Kiriaty discusses the GPS Emulator in Windows Phone 7.
Source: The Windows Phone Developer Blog
With the GPS Emulator, you can set a location anywhere on the globe by using the map display. Furthermore, you can plan routes with multiple intermediate waypoints, or use Bing services to calculate driving directions between locations. Once you’ve planned a route, you can simulate driving through the pre-defined waypoints along the path.