Applications that were made for Windows Mobile 6 are compatible with Windows Phone 7 Series. The interface of the new mobile operating system has been changed though, so the user interface for these applications will have to be changed as well.
"So there is no reason why programs written for Windows Mobile 6 cannot run on the new version of the OS", said Maarten Sonneveld of Microsoft Netherlands to Tweakers.net. "The interface is complete different though, so the applications will have to be changed somewhat before being ready for Windows Phone 7 Series".
It is still unclear how developers can port their user interfaces to the new version of Windows Mobile. Microsoft will only disclose how applications can be developed and distributed at their developer event Mix2010.
Microsoft announced it’s new OS on Monday afternoon at the Mobile World Congress in Barcelona. The OS is primarily aimed at synchronisation and integration with Microsft-services like Windows Live, Bing, Zune and Xbox Live. Aside from those Windows Phone 7 Series can also synchronise with Google-accounts and facebook.
Source
So in summary, while none of the current applications will run on it, the underlying non-UI APIs will be compatible. So if understand correctly, porting would just a case of redeveloping the UI then recompiling, rather than starting completely from scratch. This acts to filter out apps with no more developer support, and promote a consistent UI.
Doesn't sound too bad to me.
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