By default you application will not rotate when the Windows Phone is rotated. By default the SupportedOrientations property is set to Portrait, meaning the application is only displayed in portrait mode. Set the SupportedOrientations property to PortraitOrLandscape so that the application rotates when the phone rotates. For example, in XAML add SupportedOrientations="PortraitOrLandscape" to the <phone:PhoneApplicationPage> tag:
<phone:PhoneApplicationPage x:Class="C1WP7.MainPage" xmlns="http://schemas.microsoft.com/winfx/2006/xaml/presentation" xmlns:x="http://schemas.microsoft.com/winfx/2006/xaml" xmlns:phone="clr-namespace:Microsoft.Phone.Controls;assembly=Microsoft.Phone" xmlns:shell="clr-namespace:Microsoft.Phone.Shell;assembly=Microsoft.Phone" xmlns:d="http://schemas.microsoft.com/expression/blend/2008" xmlns:mc="http://schemas.openxmlformats.org/markup-compatibility/2006" mc:Ignorable="d" d:DesignWidth="480" d:DesignHeight="768" FontFamily="{StaticResource PhoneFontFamilyNormal}" FontSize="{StaticResource PhoneFontSizeNormal}" Foreground="{StaticResource PhoneForegroundBrush}" SupportedOrientations="PortraitOrLandscape" Orientation="Portrait" shell:SystemTray.IsVisible="True">
The Windows Phone has three orientation states: portrait and landscape (left or right). Your application may not appear as you would like it to when the phone is rotated. An easy solution for this is to create a templates to customize how your application will appear in portrait and landscape modes. You can us the OrientationChanged event to set the behavior of the application when the orientation of the Windows Phone changes from portrait to landscape and back.
For more information and details, see the following Help Topic on MSDN: How to: Handle Orientation Changes on Windows Phone.