Windows 7 to be integrated with Microsoft Live!.
What does it mean though?
MS has two problems :
- the desktop OS is almost a commodity. There are few applications that need Windows's specific services (as opposed to equivalents on Mac, Sun, Linux, or Android) It's hard to imagine Windows 7 doing something that other OSs aren't thinking about or couldn't quickly copy. (LINQ for serious applications? Drivers for multitouch Surfaces? Everyone will have something like that. )
- the PC is about to explode into the device swarm.
How does closer integration between Windows and Live! help in that context. It's not a winning move for MS to make their Live! services dependent on Windows 7. Will they exclude XP and Vista users from Live! in 2010? Unlikely.
After that, they can only compete on "seemless experience". But every time Microsoft compete against Apple on anything resembling an "experience", they hardly have the upper hand.
Now, the natural tethered client of an online service is a light-weight virtual machine like Flash, Silverlight or JavaFx. Not a whole operating system - users will want their virtual machines to play well together in a common sandbox, supporting
copying, pasting, dragging and dropping etc.)
There is scope for some individuation and platform warring among standards for these virtual machines. MS may be able to make Silverlight-only services, but they'll certainly have to make Silverlight run on Mac (and at least condone clones running on Linux)
This kind of virtual machine is also a natural for the device swarm : eg. Flash on Chumby, Java VM on mobiles ... Silverlight on XBox?
So while the desktop OS becomes a commodity, this space is going to get hot as the VMs compete for developers' attention. Particularly smaller devices are only likely to come with one of these virtual machines pre-installed. They'll compete on video-handling capability, graphics library, back-end data synchronization, bredth of applicability etc.
In a sense, the Java vision is finally coming into its own ... although whether Java turns out to be the victor is another matter.
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