Microsoft has updated its developer tools for Windows Phone 7, adding copy and paste functionality, improving app performance, and implementing other enhancements. The update includes reference assemblies, a new version of the Windows Phone OS emulator image, several minor bug fixes, and all improvements in previous updates; although it is branded as an update, you don't need to download an older version first if you don't already have one. You can download it directly from here: Windows Phone Developer Tools January 2011 Update.

The update is for developers only: it lets them start building the apps with updated assemblies that will ship in the next Windows Phone 7 update for consumers. All apps which are already in the Windows Phone Marketplace will of course still work on WP7 devices that get updated to the new version of the OS and any app built using this new version of the tools will also work on phones that have not received the upcoming WP7 update. Most apps will not need to be recompiled or resubmitted, but Microsoft will be scanning the marketplace and contacting developers to let them know of a few corner cases.

Microsoft took the new update as an opportunity to announce that the Windows Phone Developer Tools have already passed the 1 million download mark, in less than a year. 27,000 developers have registered on AppHub, and there are now over 7,500 apps in the Windows Phone Marketplace.