I am a student from NY state. I did my internship in MA state during year 2007. And also during 2007 I had worked on-campus in school. So I have tax withheld in NY state too.
My income for NY state is less than $7,500 but I do have taxes withheld on my W2.
So is it mandatory for me to pay the NY state tax.

Assuming you were resident of NY during 2007, you will pay NY taxes.

You will also file MA state taxes for the income earned by you during the period you were in MA. You will then claim credit for the taxes paid to MA on your NY tax return.