The Windows Phone application model isolates every application in its own sandbox, both for execution and file storage. Applications are not able to directly access common stores of information, such as the contacts list to directly invoke other applications such as the phone or messaging applications. To enable scenarios that require common tasks such as these, Windows Phone exposes a set of APIs referred to as Launchers and Choosers that allow applications indirect access to these useful phone features. The Launcher and Chooser APIs invoke distinct built-in applications that replace the currently running application.

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.

The release notes are available here. A couple of things to point out:

• Expression Blend for Windows Phone is now part of the install
• It's now possible to unlock a device (if you're fortunate enough to have one) and to deploy XAP files directly to it
• There are a number of breaking changes to the API but it's getting close to baked. You can see a full rundown here

Here are some more post about this release:

• Windows Phone CTP vs Windows Phone Beta
• Windows Phone 7 Tools Beta Available for Download by Alex Golesh
• Windows Phone Developer Tools Beta Released by the Expression Blend Team