I came across the term "IsolatedStorage" in windows phone. Can anybody explain it in detail how is it related to windows phone applications? Also how does it affect while application version upgrade?
Isolated Storage refers the private read / write directories that each app has for storing their own data. It is isolated from all other apps on the system. When an app is upgraded via the store on an end-user's machine, the isolated storage is preserved.
Note that during development, Isolated Storage of an app can be deleted if you do a full rebuild of the project.