The Deep Zoom (Seadragon) functionality has been available on Silverlight since version 2. It's a techonology that provides the ability to interactively view high-resolution images. The images need to be prepared using available tools like Deep Zoom Composer and others. The functionality is provided via the usage of the MultiScaleImage control which is availabe on WP7. This control is not there by default in your Toolbox in Visual Studio, however you can just right-click on the Toolbox, select "Choose item..." menu and pick the control from the list:
After that you can just drag-n-drop the control on your page. The MultiScaleImage contol works exactly the same as on the desktop, so it was pretty easy to wire all appropriate events by copying the code from the existing samples. All you need to do is just to provide the url to the location of the "dzi" file and the control will just "magically" work. I even re-used the buttons that come with the sample:
You can dowload the sample project from here.