It seems like the problem is that you are trying to link to a copy of Microsoft.Phone.Controls.Toolkit .dll in your Ref folder, but Visual Studio is probably looking somewhere else.
If you open Visual Studio and expand the Links folder in Solution Explorer, you will probably see that Microsoft.Phone.Controls.Toolkit is listed but is marked with a yellow warning icon.
Try right-clicking and clicking delete. Then right-click the link, navigate to the file in the Ref folder and add it again.
Update. ListPicker is a Silverlight Toolkit control for Windows Phone that is an addition to the set of controls published by Microsoft. This is the link you just added to your application.
When you add a control to the page, you need to add the .dll link to the XAML page and map it to the prefix that tells Visual Studio where to find the control:
<phone:PhoneApplicationPage x:Class="MyApp.MainPage" xmlns="http://schemas.microsoft.com/winfx/2006/xaml/presentation" xmlns:x="http://schemas.microsoft.com/winfx/2006/xaml" xmlns:phone="clr-namespace:Microsoft.Phone.Controls;assembly=Microsoft.Phone" xmlns:shell="clr-namespace:Microsoft.Phone.Shell;assembly=Microsoft.Phone" xmlns:controls="clr-namespace:Microsoft.Phone.Controls;assembly=Microsoft.Phone.Controls" xmlns:toolkit="clr-namespace:Microsoft.Phone.Controls;assembly=Microsoft.Phone.Controls.Toolkit">
Note the toolkit prefix.
Now you can add the control as follows:
<toolkit:ListPicker></toolkit:ListPicker>
If these items are configured correctly, you may also need to check if the "DLL" was locked when it was loaded. Go to .dll in Explorer, then right-click and look at the "Unblock" button below. If it is there, click it.
Links in XAML can be difficult to configure. An example toolkit application might be useful there.