In the light of recent events, here is an interesting story. Seems M$ is a bit more relaxed these days when it comes to hacking their products.

I can confirm that the jailbreak ChewronWP7 released works as I've tried it to install a NES emulator, and was able to unlock my windows phone 7 with no issues... The phone does lock back after a few days tho, as its designed to check with Microsoft servers periodically and erase the unlock.

http://www.engadget.com/2011/01/18/visualized-the-glamorous-lifestyles-of-wp7-jailbreakers/

To be a jailbreaker means different things depending on the device that you're busy hacking preinstalled walls from. If you're fiddling with consoles, a legal team would come highly recommended, but if you're tweaking mobile code, at least Windows Phone mobile code, you're in for a much sweeter ride. The ChevronWP7 guys that brought us the first jailbreak of Microsoft's Windows Phone 7 are currently in Redmond having a sitdown and a frank exchange of views with WP7 dev experience director Brandon Watson, and the amicable nature of their discourse has been evidenced by the image above. Microsoft is clearly taking a light-hearted and community-friendly approach to handling the (now inevitable) efforts at disabling limitations to its software and we can only congratulate its mobile team for doing so.

I don't really get it why everyone is restricting software on cell phones these days, Consoles I can understand because of the fear of piracy and because they are primarily gaming devices... but cell phones? What's good is that MS isn't too serious about this, but then again, I suppose they actually can't be. Jailbreaking phones became officially legal in the US last year, right?

That was so nice of them :)

Yes.

Microsoft allows you to "jailbreak" the phone. They call it developer unlock. They even provide you with programming and development tools, WP7 emulators to make apps and software for the phone and well as xbox live (same XNA tool package)

To unlock the phone and access these tools, one must pay MS 100 bucks for a license. These guys released a tool which unlocks the phone and gives you access to these tools for free.

If you look at it, MS could have been pissed about this, but I think they want the development on these phones to grow, and want the good publicity right now...so they seem to be pretty lighthearted about it.