Adobe issued a statement that Windows Mobile 7 will not have support for Flash at launch, but that they're collaborating with Microsoft to include a browser plug-in for the full Flash player in future versions of Windows Phone:
This evening Adobe issued a statement about Flash compatibility with Microsoft's Windows Mobile 7. It said, "Microsoft and Adobe are working closely together. While the newest version of Windows Phone won't support Flash at initial availability, both companies are working to include a browser plug-in for the full Flash player in future versions of Windows Phone. More details will be shared at Microsoft MIX next month."