So yeah, we all know by now that copy and paste is coming to Windows Phone 7. The remaining questions deal with how it works and what are its limitations. Lots of debate has circled this area on other sites with some claiming copy and paste will only work with native apps, but not 3rd party ones. This is far from true, it will certainly work with 3rd party apps both in terms of copying materials and pasting it.
But there are some limitations and it won't be as robust as what we used to have on Windows Mobile, where you could basically copy anything. Those limitations were described by Chris Walsh of ChevronWP7 who of course received some hands on practice with the OS update.
The limitations are thus:
...copy and paste is ONLY supported on the textbox control in 3rd party apps. When I say supported, I’m talking about the OS automagically recognizing the input control and giving the user the fancy text selection picker with a “copy” button
...certain apps don’t actually use the textbox to render read-only text. For example, the Twitter for Windows Phone app, when you’ve clicked on a tweet to either view it or click on a link, the text isn”t rendered in a TextBox control. Unfortunately you’re not going to get copy & paste there. The simple fix is to change to a textbox control for scenarios where a user might need to copy some text into the clipboard but it requires some effort from application developers
So that's a bummer for some apps that don't use a textbox (to see one Twitter app that does, see Twitt). The big question now is will this satisfy people? Probably the majority but not everyone. Finally, Walsh also notes the speed improvement from the update calling it "nothing short of pure awesome"--so that's good.
Source: My Coding Adventures