That used to be my explanation, at least, for why they are always so generous to us developers. "Own the developer and you own the marketplace", I have often said (in my more cynical days, which I have gotten past because of how much I love the tools they give me to write software with!). With Windows Live, Microsoft plans to add to it's revenue stream with advertising. We've seen it in MSN Messenger for a long time now - that [often tacky] little ad on the bottom of the application window.
Leon Bambrick (who will hopefully never lose his cynicism) notices that it goes even deeper, when he discovers that Windows Explorer is trying to push music purchases on him just because there is a wav file in the folder he is pointing to. Yes, Windows Explorer. Leon suggests that perhaps Microsoft will end up giving the O/S away as a means to just selling stuff to end users.