Starter Edition is the low end of Microsoft's Windows 7 totem pole. It is the version that most hardware OEMs will pre-install on their Windows netbook models, since Microsoft is likely to supply Starter Edition at a significant discount.
The catch is that Starter Edition will only install on what Microsoft classifies as "small notebook PCs." According to one reliable online source, this category will include devices with a screen size less than 10.2 inches, less than 1GB or memory, and a processor clock speed under 2 GHz, among other limits.
In a previous post, I predicted that Microsoft would rethink its decision to turn Windows 7 Starter Edition into a piece of de facto crippleware. The original idea -- to sell cheap Win 7 netbooks with degraded functionality and then prod users to pay for an OS upgrade -- was a sure-fire recipe for disaster.
Strangely enough, according to Thurrott, Microsoft hasn't yet changed its mind about another "bizarre" limitation built into Starter Edition: the inability to change the desktop wallpaper.