We present a new and general scheme for analytical applications of droplet-based microfluidics in which flowing droplets function not only as isolated reaction flasks, but are also capable of on-drop separation and sensing. To demonstrate this, we choose ionic liquids as designer fluids whose chemical and physical properties can be tailored in task-specific fashion. We create aqueous-ionic liquid compound droplets with tunable structures using an imidazolium-based ionic liquid, and present two analytical applications - separation of a binary aqueous mixture of organic dyes and dynamic pH sensing - to highlight the salient features of this scheme. By combining designer fluids with designer microfluidic emulsions, our work opens up a rich space of exploration for analytical microfluidics. © 2010 The Royal Society of Chemistry.