The best way for apps to detect if they are running on the Device Emulator is to use this snippet of code:

WCHAR wszMachineName[128];
SystemParametersInfo(SPI_GETOEMINFO, sizeof(wszMachineName),
          &wszMachineName, 0);

On the DeviceEmulator, it will return with wszMachineName set to "Microsoft DeviceEmulator".

For a more complete code sample, follow the MSDN article:  http://msdn.microsoft.com/library/default.asp?url=/library/en-us/dnppcgen/html/ppc_hpocket.asp.