Take heed developers, you'll want to go update your Windows Phone SDK to the official 7.1.1 version which was just released today.
This latest update offers support for 256MB RAM devices aka "Tango" phones like the Nokia Lumia 610 and ZTE Orbit.:
"The Windows Phone SDK 7.1.1 Update provides additional functionality to the existing Windows Phone SDK 7.1. Using this update, you can more easily develop apps and games that are optimized to run on 256-MB devices. This update includes a new 256-MB version of Windows Phone Emulator, an updated 512-MB version of Windows Phone Emulator, and IntelliSense support."
As noted by Microsoft, 95% of the apps currently in the Marketplace will have no problems running on these lower-end Windows Phones, but those remaining 5% will need to think about optimizing their app if they want it to run on these news devices. Microsoft began contacting developers who's apps won't be able to run the new Tango update back in February so as to avert any confusion on the matter.
Grab the new 7.1.1. SDK update right here from Microsoft and the read announcement on the Windows Phone Dev Blog.
For further information and tips on developing your app for Tango device, check out Nokia's developer guide and Best Practice Tips which should go a long way in making this an easy transition.