There are moments when you wonder if Microsoft is really embracing our Web 2.0 world or just reluctantly following along because it has to.The software giant has obviously made adjustments to the era of free software and services: It has the Windows Live platform, Microsoft Security Essentials malware protection, the Bing search engine, and soon there will be a Web version of Office with the release of Office 2010 next year. They're all free.Somebody should tell CEO Steve Ballmer.While in Paris debuting Windows Mobile 6.5 this week, Ballmer was quoted by Reuters as saying: "Free is not a business model. We are a commercial company. We will look to gain revenue and profit from our activities. You'll have to ask our competitors if they'll make money on free things."Ok, I get what he's saying: free by itself is not a business model. But we knew that. Ballmer did not need to clarify this point, and he seems out of touch. As for the competitors that make money on free things. I haven't paid a cent for the Google services that I use, and last I heard that company is doing just fine financially."Free" is an important component of today's business model. You use the free products to promote or leverage other more lucrative parts of your business. Microsoft obviously knows this. It is frantically trying to catch up to Google in this space, which makes Ballmer's comment so puzzling.Microsoft has watched Google make a fortune from offering free software and services and has been investing billions of dollars in its own free services like Bing and Windows Live. Clearly, Ballmer believes in the value of free services or he would not have invested so much in them. But he is an old school business man and the idea of giving anything away for free still irks him, and sometimes he speaks without a filter, to put it lightly.Mostly, I think, Ballmer's "free" comments show his frustration in having to change. Not only has he contradicted himself by saying Microsoft shuns free stuff when it has been consistently releasing free software and services, but he comes across as stuck in the past, recalling a time when Microsoft comfortably dominated software and charged for everything.It's all right to be old school, but Ballmer's latest foot-in-mouth just makes Microsoft look old.Shane O'Neill is a senior writer at CIO.com. Follow him on Twitter at twitter.com\/smoneill. Follow everything from CIO.com on Twitter at twitter.com\/CIOonline.