The Windows Phone 7 supports multitouch when if your Windows 7 computer is touch enabled. However, if you don't have hardware supporting multitouch you can still get multitouch inside the emulator using the MultiTouchVista open source project. MultiTouchVista lets you install a virtual touch driver in Windows 7. The MultiTouchVista driver can read input from devices like multiple mice, webcams etc. and translate them into standard Windows 7 touch events.

Full blog post over at jonas.follesoe.no/SimulatingMultitouchOnTheWindowsPhone7Emulator.aspx

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