We are currently building one of our applications on Windows XP and targeting only XP. As of now, we are not shipping our applicaton on Windows 7. But we are planning to move to Windows 7.
Is it fine to build the application on XP and install it on Windows 7. This will work.
If we built the application on Windows 7, do we need to make any modification to our code to run on Windows 7?
For the most part, apps that run on XP run on Vista & Win 7 just fine so long as any needed drivers/libraries also run on Vista/7. The big gotcha you're likely to face is that Vista and Win7, by default, create user accounts with restricted rights. For example, you cant write to files within the Program Files directory structure without running with elevated rights (there's some caveats with this). XP can be configured as such too, of course, but it usually isnt, particularly with home users.
So one thing you'll need to make sure is that your app is not trying to write its data to files within the Program Files directory. Specifically, you'll want to make sure all application data is stored in the default application data directories (on Vista its c:\users\\appdata..., I think its the same on 7).
There's other things to keep in mind as well. Win7 uses a different default application font, for example. So you may want to take a look at some of those kinds of cosmetic changes. But they wont typically prevent your app from running - they'll just make the app look a bit out of place.