The one thing that irritated me the most about the Windows Phone 7 emulator the first time I used it was that the host computer keyboard is not directly mapped to the emulator. This means you by default have to use the software input panel that is built in Windows Phone 7.
I immediately looked for a solution and found some MSDN documentation on the keyboard mappings for the emulator.
To enable the keyboard in the emulator - press the PAGE UP key or PAUSE/BREAK key.
To disable the keyboard in the emulator - press the PAGE DOWN key PAUSE/BREAK key.
If you want to learn more then I suggest you check out this article called Keyboard Mapping for Windows Phone Emulator