Microsoft also has a research project called Midori that envisions a next-generation Windows in which the OS becomes more Internet-centric and eliminates dependencies between local applications and the hardware on which they run, although the company has not said how this might fit into Windows' commercial future.

The emergence of netbooks, however, changed everything, taking not only Microsoft but also the rest of the hardware and software industries by surprise, and providing a vehicle for Google to make its move into the OS market.

"Netbooks showed up and startled everybody," said Forrester analyst Frank Gillett.

But while netbooks provide a way for Google to get a foot in the door of the personal computer market, the company certainly has aspirations to challenge Microsoft on more traditional PC form factors as well, he said.

Google's challenge and its implications usher in a new phase for the OS market in which both the hardware that the OS runs on, and the OS itself, become less important, and a device's ability to keep people connected to the Internet and their applications and data that live there becomes paramount.

"Google Chrome OS is the death knell for a PC-centric OS," Gillett said. "The next versions of Windows need to be much more Internet-centric."

Microsoft has been moving in this direction for some time but has yet to clarify its direction for how Windows, running across multiple devices, will take full advantage of the Web; the company so far has revealed the strategy only in bits and pieces.

Technologies like its Windows Live applications and services -- including the compelling but poorly understood Mesh technology, which keeps files on various devices updated by tying them to a "mesh" via the Internet -- are part of a larger Microsoft vision for connecting people to the Web through software. But the company has yet to connect the dots between those services and Windows, analysts said.

"I think they have the strategy in place, but they haven't executed on it particularly well yet," said Michael Silver, a Gartner vice president and distinguished analyst.

The company may now have to scramble to fill in the blanks. Microsoft has never been a company that likes to move quickly, and until now the PC-centric world of its user base hasn't forced it to, he said.

But things move faster on the Web. When Microsoft rested on its laurels with Internet Explorer -- the de facto Web browser for many years -- Mozilla disrupted the market with innovations in its Firefox Web browser. It was only when Firefox started to threaten IE's market share that Microsoft began again to seriously update IE.