While the Find My Phone services aren't new to Windows Phone 7.5--they were present in the original shipping version of Windows Phone as well--Microsoft has somewhat updated them for the new release and made them more easily available from the also revamped Windows Phone web site. So let's take a look and see how they work.
Find My Phone is part of the broader My Windows Phone set of services, which also includes the other online services that Microsoft makes available to Windows Phone users, including photo and video sharing, apps and purchase history (which I previously highlighted in a screenshot gallery), Xbox LIVE, and Office documents and notes. There's also a link to a Microsoft/Bing service I've never seen mentioned anywhere called Microsoft Scrapbook, which appears to be a Facebook Check-in-type service.
As for Find My Phone, this service provides four basic functions. You can use it to locate your phone on a map, of course, and as you can see from this shot, the service actually uses the accent color you chose on the phone (I'm using "Mango"):
I've been testing this around Fort Collins, Colorado this week since I'm here for work, and I'm pretty impressed by the accuracy. That location is exactly correct, possibly to within 10 feet or so. You can print the map if you want to, which could be useful, and Microsoft sends you an email each time you use the service, with a link you can click to see the phone's location on a map.
Second, you can ring your phone from this interface using the Ring link. That's handy if you're near the phone but can't find it: Perhaps you used the Find My Phone map to locate it and now need an audible clue to the exact location. And it uses a unique combination of ringing and vibrating to aid in locating the device. This works even if the phone is in vibrate mode.
Third, you can lock the phone. This doesn't just "lock" the device, however. (And hopefully you're already auto-locking your handset with a PIN anyway.) It lets you add an optional message (possibly with a phone number and/or email address) that will appear on the front of the phone, giving a thief or finder the ability to contact you. Hey, they're not all bad people, so you never know.
Once you've gotten your phone back, you can simply enter your PIN to remove the lock message.
Finally, you can also use Find My Phone to remotely wipe your handset using the Erase function. This will erase all of the data on your phone and return it to its factory-fresh, original state. Doing so can be useful if you can't get the phone back for whatever reason and you don't want your personal information stolen. But it will permanently erase your pictures, videos, apps, music, accounts, documents, and other data, and it removes the phone from Find My Phone. So be sure you're really serious before proceeding.
Find My Phone is a great service, and you can't beat the price: It's free to all Windows Phone users. (It's also not limited to Windows Phone 7.5; it works with previous versions of Windows Phone 7 as well.) I'm curious to test this in other parts of the country, but so far so good.