Some background  on creating high performance 3D on Windows Phone 7 from the Mix 2010 conference.. Before we continue the texturing tutorial..

XNA on Windows Phone 7 has 5 configurable shaders.

Basic Effect –Provides some simple lighting options.

Dual Textured Effect – Combine two textures to create sophisticated lighting effects

Alpha Test Effect – Alpha blending support with no performance hits,  you can use this effect to draw duplicate graphical  assets in 3D.

Skinned Effect – Drawing characters that move with bones uses GPU.

Environment Map Effect – Create shiny FX, using a texture and a reflective cube map using the GPU..