Check out this page in the SDK:

http://msdn2.microsoft.com/en-us/library/bb412386.aspx

Streaming

In addition to progressive downloads, MediaElement supports live and on-demand streaming from a Windows Media Server. If the file URI specifies the mms protocol, the MediaElement attempts to stream the file first. If the file can't be streamed, it downloads the file progressively. If the file URI specifies another protocol, such as http or https, the MediaElement attempts a progressive download first. If that fails, the MediaElement attempts to stream the file.

Note that live streaming media cannot be paused--calling the Pause method has no effect.

To find out more about the differences between streaming and progressive downloading, see Key Concepts in Windows Media Technologies.