I have two phones that are set up with the same google account.
I have a paid app I bought and use on phone 1.
Is it possible for me to use the app on phone 2?
If so, how do I do this? In the market it asks me to buy it again.
Your application purchases are tied to your Google Account and can be installed an unlimited amount of times on any device
So to clarify, you want to use the app simultaneously on two phones? In that case the link pointed to by Dennis might not apply, since that one seems to be for the case when you buy a new phone and stop using the old one.
Edit: Actually it looks like having multiple active devices simultaneously should not be an issue, from this other question: Can I use multiple Android devices with a single Google account?