Google, obviously best known for their search engine, have just launched yet another service: Google Talk. It's now fairly obvious they're out to take on Microsoft on its own ground. The recent update to the Google Desktop Search (beta 2), pushes their impressive home search software's capabilities even further, providing a raft of new features. GDS tackles an area Microsoft has been touting for it's new operating system, Vista, but with its (current) launch date of late-2006, Google has plenty of time to grab a chunk of the home search market. Google Talk is an obvious contender against Microsoft's Instant Messenger client and Gmail took on Hotmail and certainly forced some changes, there's even been talk of Google launching it's own web browser (possibly to compete with Internet Explorer).
Microsoft has been fighting back though, by launching its own search engine. I'm not sure how overtly it was said, but MSN Search was designed as a Google-killer. MS has the high-ground in this conflict, with more money and a secure desktop OS market. The rumblings in the webosphere are that the OS and application markets might be the next target. Not via the traditional OS route, but using what's been termed a WebOS, with everything operating through a web browser. Kottke has a very interesting post on this.
This isn't new, MS talked about having a purely web-based OS years ago, along with Application Service Providers where you pay per use for applications like Word. It didn't happen because the networks weren't up to it, not to mention that people like having things installed locally so they can work whether they're online or not and, lest we forget, some major security implications. And for anyone who manipulates graphics or videos or any big files, that seriously needs to be done locally. So what needs to be done is some sort of framework on which to build this stuff. Basically, don't hold your breath, I don't reckon MS will have any serious challengers on PC hardware for some time (it's more likely Apple will make the jump across).