At Microsoft’s Mix08 conference for web designers and developers earlier in March, the firm showed off its developments and coming attractions, including a new focus on standards in Internet Explorer and an update to its Silverlight platform for browser-based applications.

“The internet is reshaping and transforming Microsoft’s existing products and services,” said Microsoft’s chief software architect, Ray Ozzie, speaking at the conference. However, this is nothing new; Microsoft founder Bill Gates expressed similar sentiments in 1995, in a now-famous memo titled The Internet Tidal Wave.

More than a decade later, making sense of the web remains Microsoft’s biggest challenge. Ozzie’s keynote was too vague to be truly compelling, but Mix08 was nevertheless the launch platform for some significant new elements in Microsoft’s internet efforts.

The first of these is Internet Explorer 8 (IE8), a major update to the company’s popular browser. Second, the company presented the first beta release of Silverlight 2.0, its multimedia browser plug-in, an important development in the context of the company’s overall web strategy. This is because unlike Silverlight 1.0, which was purely targeted at multimedia, the new version contains a cut-down version of Microsoft’s .Net Framework, which means it can run application code written in C#, Visual Basic, or even in Ruby or Python, thanks to a piece called the Dynamic Language Runtime.

With improved performance over version one, and in combination with Extensible Application Markup Language (XAML), an XML language for defining rich content, Silverlight can support engaging and capable web applications. Adobe’s Flash has been doing this for a while, but Silverlight has a few advantages up its sleeve.

Whereas Adobe’s cross-platform development and deployment system, Flex, lets you compile an XML layout to Flash, Silverlight is able to render an XML layout directly. Silverlight’s Deep Zoom technology also allows users to magnify web images to inspect tiny details, a concept that was shown at Mix08 by Aston Martin to provide a virtual showroom for its luxury cars.

Developers already familiar with Microsoft’s platform will find Silverlight an easy transition to make, since it has Visual Studio support, and hooks into web services running on ASP.NET.

The big questions around Silverlight are how it will fare in the market relative to Flash; and secondly, how it will impact the evolution of Internet Explorer. Flash has a big head start, especially in video. The BBC, for example, has said it intends to move to Flash for all the video content on its web site, though not for the iPlayer download service. Microsoft developers will embrace Silverlight, but the wider web community may be more reluctant to adopt the technology.

IE8 is a major new release, now in beta. Its page rendering code has now been completely rewritten to conform to Cascading Style Sheets (CSS) 2.1, which means the browser can for the first time pass the Acid2 Browser Test, the official compliance test from the Web Standards Project. Web developers are euphoric about this, because much of their time is currently spent working around bugs in IE. No date has yet been set for IE8’s release, but it is widely expected to be delivered by late 2008 or early 2009.

IE’s general manager, Dean Hachamovitch, also showed improved script performance, and the addition of safe local storage for web applications, based on the HTML 5.0 Document Object Model (DOM) Storage specification, offering up to 10MB per domain.

Two other new features are called Activities and WebSlices. Activities are browser add-ons, defined in XML, which let the user select some text in a page and get additional right-click links such as “View map” or “Look up in dictionary”. WebSlices let users subscribe to portions of a page in a similar way to a blog feed. Neither feature is particularly exciting, but more user-centric innovations are promised before launch.

As to how Silverlight will impact IE evolution, there are already hints that Microsoft may hold back on more powerful in-browser scripting in order to promote Silverlight for web applications. Hachamovitch said that Silverlight is “fantastic for developers”, while showing little interest in ECMAScript 4.0, an upgrade to JavaScript that Mozilla sees as fundamental to its next-generation browser platform.

Looking ahead, Microsoft’s efforts with Silverlight would seem to validate Adobe’s developments regarding rich internet applications. However, both Silverlight and Flash are proprietary, so the stage is set for yet another standards battle as Adobe and Mozilla vie with Microsoft for dominance, moves which could eventually affect the web’s future as an open platform.

Few Microsoft speakers at Mix08 dared to mention the firm’s recent takeover bid for Yahoo. One who did was chief executive Steve Ballmer, who said the deal was about search and advertising. “Search in some senses is the killer application of advertising... we are not where we’d like to be, and Yahoo seems to be a way to accelerate that,” he said.

Asked what Microsoft would do with all Yahoo’s PHP applications, if the takeover proves to be successful, Ballmer replied, “I’m sure a bunch of them will be running at high scale and in production for a long time to come. . . We shouldn’t have two of everything. It won’t make sense to have two search services, two advertising services, two mail services.”

The answer confirms the integration challenge facing Microsoft if the deal goes ahead.

Also unveiled by Microsoft at Mix08 was SQL Data Services, a hosted SQL Server that Microsoft will market as a pay-as-you-go service. It exposes only a small subset of SQL Server’s full features, with the emphasis being on simplicity.

Developers will use either the Simple Object Access Protocol (Soap) or Representational State Transfer (Rest) API to store, retrieve and update data in the cloud. SQL is not supported, but the service does integrate neatly with Microsoft’s Language Integrated Query (Linq), a .Net feature recently implemented in Visual Studio 2008. Integration with Microsoft’s Sync Framework library will also let developers create database applications that work offline over one or more devices, but which use the internet as a central hub.

SQL Data Services can also be installed on an intranet, as a library in front of a standard SQL Server. A full release of SQL Server Data Services is planned for mid-2009 and may be an early example of what Ozzie meant when he said in his keynote that all Microsoft software will be “significantly refactored to provide a level of symmetry between enterprise-based software, partner-hosted services, and services in the cloud”.

It seems likely that further hosted services will follow, moving Microsoft into further competition with Amazon, Google and others.