Between Google’s IPO, its Gmail venture, Wikipedia, and the rise of a vigorous blogging culture, I believe we are entering the next period of go-go Internet excitement. A lot of good stuff is happening, and if I were Microsoft, I would be concerned. The next big trends, by and large, are online services that you can do through a basic browser (i.e. not a proprietary Microsoft rich client). Starting with email, Google has an excellent platform to eat at the edges of the Microsoft empire one Office product at a time.
And things are finally happening again in the browser world, with the momentum shifting to free yet innovative products like Firefox and Mozilla. Read Ben Hammersley’s article on the Guardian: The second browser war.
Rambles Blog at Star Chamber 
FYI, the inventor of Wiki is now employed by Microsoft. And there are various MSR projects on blogging extensions going on.
I’d say in general MS has never understood the internet or internet communities, but they still manage to absorb or hire folks that do; it’s their own coporate culture fault if they can’t make a buck off it.