After hearing that Microsoft has decided to finally do away with Windows Genuine Advantage, I realized there was one enormous repercussion: It puts Windows Vista and Linux on a far more even footing than ever before. And it essentially makes Vista into freeware, but that's just a handy side effect.
First, the details. After a lot of negative feedback from all quarters about how Windows Genuine Advantage was, quite simply, too flaky to work properly in a real-world scenario, Microsoft has decided to change the way WGA works in Windows Vista. Right now, if you don't choose to activate a system after the timeout period, or if it's shown not to be genuine, the system gives you a three-day warning period and then enters "reduced functionality mode." After Vista SP1, the worst that will happen is a warning notice that forces a 15-second delay at login, and a reminder every hour on the hour to activate.
In short, after Vista SP1, anyone can run a fully functional copy of Windows Vista without having to pay for it.
That said, I'm fairly certain that Microsoft knows this, and is, in a way, banking on it to offset the growth of Linux. You'd never get it to admit it, of course.
First, Microsoft would rather run the risk of losing a little money upfront at the cost of having that many more copies of Windows running in whatever form. What people tend to forget is that as long as someone, anyone, is running Windows, even if they didn't pay for it, Microsoft still wins. They're providing that much more of a space for Windows software of any kind to run in, which for Microsoft is always a winning proposition.
Think about it: That many more copies of Windows means that many more copies of Office, that many more copies of the development environments used to build Windows software, that many more copies of games that require Windows, and so on. All of that is, in one form or another, money back into Microsoft's pocket. Yes, Windows programs also do run on Wine -- but I suspect people are not going to bother to try running Wine in Linux if Windows itself is that much more readily available anyway.
Second, most people will still pay for a copy of Windows, and pay gladly. Most copies of Windows are sold with a new PC, not as a boxed product, and as long as the OEM market decides Windows is still worth preloading onto PCs, Microsoft comes out ahead. Maybe it won't make the kind of money it could have been making if WGA was bulletproof, but WGA isn't bulletproof -- no copy-protection system ever is. However, if Linux OEM desktop sales start booming and eat significantly into Windows OEM desktop sales, this revenue stream isn't going to be guaranteed, either.
Third, running unlicensed copies of Windows is a big no-no if you're a business of any kind. Businesses will probably not want to run the risk of being audited by the BSA if someone within their company reports them -- that is, if they continue to use Windows at all and don't simply decide to switch to Linux and avoid licensing hassles completely. That, of course, depends on what they're doing, and whether or not they can easily replace Windows with Linux, but you get the idea.
Fourth, the fact that Microsoft is offering discounted Windows licenses to people who report unlicensed copies also is part of this strategy. There are many instances of both users and resellers who got burned by buying what they thought were legit copies of Windows, and that's indisputably a problem worth tackling. Nobody likes getting taken for a ride.
That said, the latter almost sounds like an incentive to pirate Windows. Steal a copy, run it for a while, then apply for a reduced-cost license -- or, don't even bother, just put up with the nag box whenever it appears. I know of almost no one who would consider a perpetual nag box (like, say, UAC) much of a show-stopper to running Windows at no cost. But, again, Microsoft is betting at least some people will take advantage of it, which in the end puts money back in its pockets once more.
I suspect Microsoft has started to think about this situation in something of the same way the record labels are starting to think about DRM-free downloads. It's better to make some money upfront, even if imperfectly, than it is to lose money preemptively by alienating many of their potential or current customers. Plus, if Microsoft rebuilds some burned bridges this way, it will be good for the company -- especially since it could, in time, lose just about everything to software that costs just about nothing.