Make no mistake, though, this is a marketing play. There's no groundbreaking technology here; all the parts are already products or services in their own right. It is not, as many news reports have said, software as a service. Sure, a few parts like Office Live Workspace are served by the Internet, but they're not very useful without having some version of Office already installed on the system. The difference with Equipt is that you can pay as you go with annual licensing, rather than paying a single fee for Office at the time of purchase.
I'm a bit puzzled by Microsoft's opening gambit, though; Equipt is only offered through Circuit City at the moment. Perhaps it needs to monitor the situation to make sure a deal this good doesn't excessively cannibalize existing sales of Office. Circuit City has been hurting lately, so perhaps the retailer welcomed a deal like this as a way to bring new traffic into its stores -- even if its cut of the sale was minimal, and I suspect that it is.
Why not sell through OEMs as well, for example? I think it comes down to the deal being too good for Microsoft to share. The Dell site sells a 15-month subscription to McAfee or Symantec security suites for $79 and $89, respectively. Office HSE from Dell is another $150. Dell is no doubt getting a generous cut of both these sales. How much of the $70-a-year Equipt license fee could Microsoft afford to give to Dell? Not much, I think. So perhaps the best Internet angle Microsoft added to Equipt is eliminating the middleman markup.