Microsoft released a native Youtube client for WP7 to watch Youtube videos. Actually its not a standalone client/app as Youtube appears on other platforms but just opens the Youtube video URLâ€™s to play it.
Now a company called Lazyworm has released a full featured Youtube Client App. You can search, filter and sort videos effortlessly and browse featured, most viewed, top rated, authors and related videos via the sleek user interface which harnesses Windows Phone 7 navigation techniques.
This application still requires that you first install Microsoftâ€™s native YouTube application from the Marketplace for watching the video, but that is surely no hardship.