Within a year, 90% of Microsoft employees will be working on cloud-related projects
That's a lot of man hours going into cloud computing, and Microsoft must surely be dwarfing any and all of its competitors' efforts. Perhaps that's why Ballmer went on to say they are "betting our company" on the cloud -- though with almost $80 billion in assets, I dare say they can afford a mistake or two during their initial foray into the cloud.
PaidContent has a great break-down of Ballmer's (epic) University of Washington speech. In short: more tailored surfing/search experiences (a la Google); privacy remains a big concern; and, citing the new Windows Phone 7, Ballmer suggests that the device you use to access a service is perhaps more important than the browser itself.
There's also a neat Microsoft Cloud Services website too, which I haven't seen before! (Warning, it has a noisy auto-playing video, grr...)