Microsoft's week was all about Windows 7.

Years ago, Bill Gates talked about a Microsoft philosophy that saw a computer running Windows on every desk and in every home. During the Windows 7 launch in New York City on Oct. 22, Microsoft CEO Steve Ballmer rolled out version 2.0 of that philosophy: Windows running not only on PCs, but also smartphones, televisions and virtually everything else sprinkled through a home or office with a screen.

That "three screens and a cloud" strategy is something that Microsoft has been touting for some time, but the Windows 7 event allowed Redmond executives to demonstrate that somewhat theoretical concept at work.

Brad Brooks, corporate vice president of Windows Consumer Marketing and Product Management at Microsoft, took the stage after Ballmer to demonstrate Play To, which lets a Windows 7 PC stream various media—including digital photos, music and video—to a handful of screens around a house. He also demonstrated HomeGroup, a feature that supposedly streamlines home networking and simplifies processes such as plugging in devices.

Ballmer suggested that, despite the moribund state of the economy, around 300 million PCs will be sold this year in the U.S., before rattling off the various form-factors that customers could select: netbooks, ultra-thins, traditional notebooks, desktops, and the "all-in-one style of PC."

The ultimate goal, Ballmer said, was to extend Windows computing into "every facet" of peoples’ lives.

But the operating-system landscape has changed significantly since the release of Windows Vista three years ago, and Microsoft finds itself at a possible tipping point. Although a number of initial user complaints about Vista were settled by that platform’s later service packs, the stigma of the operating system as too slow and incompatible with third-party software clung to it over the course of its lifespan.

During that period, Apple was able to gain a few points’ worth of market-share. Although Ballmer and other executives have dismissed those gains as virtually a rounding error in Microsoft’s dominance of the operating system market, Microsoft’s "Laptop Hunter" ads earlier this year suggested that Redmond had found Apple to be enough of a threat—or a nuisance—to attack Steve Jobs’ company directly.

Designed to play on consumers tightening their wallets in the midst of an economic recession, those “Laptop Hunter” ads showed a handful of customers hunting for a new laptop, all of them eventually deciding on a cheaper Windows-equipped device over a MacBook.

In addition to Apple, Microsoft also faces the prospect of competition from Google, whose Android OS is being slowly ported onto netbooks, and which is supposedly producing Google Chrome OS, a robust browser-based operating system, for release on low-powered laptops sometime in 2010.

These alternatives, along with omnipresent Linux, may not be eating substantially into Microsoft’s operating-system market share, but they remain portents of a possible future to which Microsoft seems duty-bound to react.

As part of that reaction, Microsoft has been taking more and more of its core products to the cloud. Office 2010, the next generation of its productivity suite, will include stripped-down, cloud-based versions of Word and other programs, accessible via Windows Live. And Windows 7 itself has been designed to interact increasingly with the Web.

The question now are how quickly the enterprise and SMBs (small- to medium-sized businesses)—some 80 percent of which are still running Windows XP, according to one analyst report—will be willing to upgrade their IT infrastructure to Windows 7. Redmond is probably also wondering, even if their product proves a hit with consumers, what its rivals will be doing to up the competition.