Nick is talking about Virtual Earth and mapPoint in location aware applications. The talk is quite advanced with showing us an overview of both products (MapPoint has a nice soap interface... virtual earth requires screen scraping). There is lots of code in this demo as Nick gave us the disclaimer.

MS does not allow you to cache a lot of data actually and caching may invalidate your service level. Nick recommended to check with your MapPoint rep about this.

Nick shows how to find the closest hooters within 10 miles of our current location (Did I mention this app was free to download). He shows then how to get driving directions from the current location to the nearest hooters (free to download people... free!).

Developer account for mappoint is free but has a cap on how many hits you can make to the service to prevent abuse. Nick has never hit this limit so it is probably really high and would require multiple users on the same account to hit the cap. For a production App you will need a mappoint license.

Can you emulate GPS? yes you can in the v2.0 emulator (v1.1 ships with vs 2005) that ships with v6.0 of the mobile SDK.
Disconnected data? is really hard to do and limited. Nick recommended to use the bluetooth link on my phone to add in a modem or the wifi ability to pick up wireless access points.