Microsoft chairman Bill Gates on Tuesday said PCs with increasing processing power and rich Web applications would work hand-in-hand with the Internet to deliver services across devices, whether mobile or in the living room.

In what may be his final appearance at Microsoft's WinHEC (Hardware Engineering Conference), Gates said future innovations in the PC industry would revolve around 64-bit computing, the development of more humanistic interfaces, unified communications, and Web services.

Among the shifts in home computing is the move to 64-bit applications running on multicore processors that not only provide faster processing, but also more system memory for faster application performance, Gates said. Such technology will find its way not only into desktops and notebooks, but into handheld devices -- including the cell phone. "Most of what's being sold today in the server space, and even in the consumer space, will have that 64-bit capability," Gates said.

For the industry, the shift will mean new software drivers to run peripherals through the PC. "It's not a dramatic change, but there's still work to be done and the industry is about halfway through in getting all the pieces in place," Gates said.

Gates told attendees at the conference that the PC platform will continue to morph into many different form factors, becoming embedded in other devices, such as refrigerators and toys, as well as becoming a more mobile device always connected to the Internet. Microsoft is already moving in the latter direction in working with hardware partners on the ultra-mobile PC.

Microsoft also plans to innovate in building a more natural interface for the PC. Microsoft expects to spend billions of dollars developing speech recognition technology for accomplishing computing tasks. As an example of Microsoft's commitment, Gates pointed to the the company's acquisition of Tellme Networks. "It shows our confidence that voice input will be a major way to interact with a lot of devices," he said.

Internet telephony, or voice over Internet protocol, will merge the PC with the telephone to bring new types of devices that bring together all types of communications -- instant messaging, voice mail, email and video conferencing.

Finally, Microsoft plans to continue developing Web-based services that synchronize with data on the PC. Not surprisingly, Microsoft doesn't see a world in which dumb devices connect to Internet servers that hold all the data and processing power. Nevertheless, Gates recognizes that huge data centers, such as those running Google and Amazon.com, will play an important role. "This is going to change [PC] applications, but its still going to require richness on the client," he said.

Following Gates' keynote, Craig Mundie, chief research and strategy officer for Microsoft, took the stage and discussed the challenges developers will face as the majority of the world's population access the Internet not through a PC, but through cheaper mobile phones or handheld devices.

Among the challenges will be in constructing loosely coupled applications that can communicate with software on the Web, or in other devices through peer-to-peer networks. Maintaining reliability will be challenging in such a distributed system, Mundie said. "The complexity is going to be quite daunting."