I am trying to deploy some applications downloaded from marketplace to Windows Phone Emulator, but for every application it is showing error message ".xap file is invalid". What could be going wrong here? Any suggestions? I have tried to keep Emulator running as well.
No you can't install apps from the store in the emulator, because you can't add a Microsoft account in the emulator which is required for installing apps from the store.
This is apparantly because the emulator is not seen as a trusted platform for Microsoft id. Here is an official answer from Microsoft to the same question:
Source: How to launch the Marketplace in the Windows Phone 8 Emulator