In the CE based Windows Mobile you could prevent the screen back-light from timing out using the SetPowerRequirement and ReleasePowerRequirement API's like so:
IntPtr handle = SetPowerRequirement("BKL1:", PowerState.FULL, 1, IntPtr.Zero, 0);
// screen won't timeout while you do stuff in here
ReleasePowerREquirement(handle);
Is a similar thing possible on WP7?
Yes, it is possible. You can use PhoneApplicationService.Current.UserIdleDetectionMode to stop the screen backlight timing out and stop the screen from locking.
You can also use PhoneApplicationService.Current.ApplicationIdleDetectionMode to allow the application to keep running under a lock screen.
Here's some more detail on those two options:
Disabling this will stop the screen from timing out and locking. As an example, I disable UserIdleDetectionMode while downloading a large file, so the app doesn't kill the download half-way.
When the download is completed, I re-enable UserIdleDetectionMode so the screen can timeout as usual.
NB: This is a one-time hit. You can disable it, but you cannot re-enable it.
If you disable ApplicationIdleDetectionMode, your app will continue to run when the screen locks. Your app will still die if the user starts a different app.
The certification requirements ask that you prompt the user the first time you disable ApplicationIdleDetectionMode. E.g. "This app will continue to run under a locked screen, and may drain your battery. Are you ok with that?" If you don't your app will be rejected.