Okay now this is pretty cool:
This is the Bing Translator, and what this does is that it uses your phone camera and provides on-the-fly translation of languages, and displays them on your screen. Furthermore Bing allows you to download language sets, so this translation will work without a connection to the Internet.
Apparently there is a similar application on iOS called WordLens but honestly I have not heard anyone mentioning it before. Maybe this cool feature might go unnoticed as well due to the small user-base of Windows Phones.