1. Add a reference to “Microsoft.Phone.Shell”
2. In your page Add a namespace declaration with prefix of shell:

 xmlns:shell="clr-namespace:Microsoft.Phone.Shell;assembly=Microsoft.Phone.Shell"

3. Add images to your project either and ensure that you set the Copy to Output Directory as Always and Build Action as Content
4. Add your application bar

    <phoneNavigation:PhoneApplicationPage.ApplicationBar>
        <shell:ApplicationBar Visible="True" IsMenuEnabled="True">
            <shell:ApplicationBar.Buttons>
                <shell:ApplicationBarIconButton x:Name="btnUndo" IconUri="/Images/light/appbar.minus.rest.png" Click="btnUndo_Click"></shell:ApplicationBarIconButton>
                <shell:ApplicationBarIconButton x:Name="btnRedo" IconUri="/Images/light/appbar.add.rest.png" Click="btnRedo_Click" ></shell:ApplicationBarIconButton>
            </shell:ApplicationBar.Buttons>
            <shell:ApplicationBar.MenuItems>
                <shell:ApplicationBarMenuItem x:Name="mnuItemX" Text="Menu Item X"></shell:ApplicationBarMenuItem>
                <shell:ApplicationBarMenuItem x:Name="mnuItemY" Text="Menu Item Y"></shell:ApplicationBarMenuItem>
            </shell:ApplicationBar.MenuItems>
        </shell:ApplicationBar>
    </phoneNavigation:PhoneApplicationPage.ApplicationBar>
</phoneNavigation:PhoneApplicationPage>

5. Wire up the event handlers

        private void btnUndo_Click(object sender, EventArgs e)
        {
            _vm.Undo();
        }

        private void btnRedo_Click(object sender, EventArgs e)
        {
            _vm.Redo();
        }

6. Results

Before using ApplicationBarAfter WP7 ApplicationBar Collapsed

After WP7 ApplicationBar Collapsed

After WP7 ApplicationBar Expanded

 Some useful resources for the Application Bar are as follows: