Live tiles can change to show you what's going on in your life, using “glanceability”. They also make the phone more personal. The People tile, for example, keeps showing mugshots of people you know, and the Pictures tile shows a photo you've taken. This has an interesting consequence, which is that the more you use the phone, the better it gets. If the network operators are smart, they'll prepopulate their demo phones with Facebook connections, personal photos, music, PowerPoint slides and so on. A data-centric phone looks much less interesting when it doesn't have any data to work on.
There will eventually be thousands of apps for Windows Phone 7, but Microsoft's slogan should be: “You don't need an app for that.”
Another novel aspect to Microsoft's strategy is its attempt to steer a middle course between the rigid control that Apple exerts over the iPhone and the relative chaos of the Android market. Microsoft is doing this by rigidly controlling the baseline product, while encouraging phone manufacturers and networks to “add value” on top. The HTC 7 Mozart that I've been using, for example, has an HTC Hub tile that provides a few “featured apps” (Photo Enhancer, Notes etc) and four dedicated Orange tiles for Maps (coming soon), Orange Weds, Your Orange and Orange Daily. I can, of course, remove these tiles from my home screen, or move them to a less prominent position. However, Microsoft says the phone makers and network providers are not able to remove any standard features, and they can't put their own user interface on top. I can easily access Google and Gmail from Windows Phone 7, but I can't remove Windows Live Mail or Bing.
It's a strategy that will provide the sort of variety that you can't get with the iPhone -- where your only choice is to buy what Apple chooses to sell -- while ensuring a consistent user experience across many different handsets. For example, you will be able to get a Windows Phone 7 with a big (4.3 inch) screen, a slider phone with a tiny keyboard, at least one with a horizontal keyboard (from HTC), a fashion phone, a ruggedised phone, and so on. (Some of these will appear in the next batch of hardware announcements, which should be more business oriented.)
It will undoubtedly be tough for Microsoft to turn around its smartphone business, where its market share has slumped from about 20% to 10% last year and roughly 5% today. It will be even tougher for Microsoft to make any money from Windows Phone 7, because it's competing with a market leader that's free. Selling 100 million phones at $10 per operating system probably won't even cover the development and launch costs, and if it's making $5 per pop, it's swimming in red ink.
If you're placing any bets, then Apple iPhone and Google Android are the clear favourites, with RIM BlackBerry and Nokia likely to fight for third place. Microsoft is now the rank outsider, but it doesn't mind being the underdog, and it has come from nowhere several times before. Windows Phone 7 looks very unlikely to win the smartphone wars, but at least it's a worthy challenger. I could never have said that about Windows Mobile.