There’s a great blog posting by James Podgorski on the MSDN App Fabric Customer Advisory Team blog site, called SQL Azure and Entity Framework Connection Fault Handling. James provides some background, and then goes through three scenarios, with code samples, and SQL Profiler print outs.
SQL Azure connections are, naturally, just like regular SQL Server connections, but with a few added caveats. And there are some things to think about when you handle them in an Entity Framework application. James goes through this in nice detail.