When Microsoft transformed its Connected Home business group into the new Windows eHome Division last February,, the company obviously had big plans for home users. Early living room-oriented products such as the Xbox video-game console, Photo Viewer, and Web TV/Ultimate TV were clues about Microsoft's goal to expand its presence beyond PCs in the home office. But the company's core strength lies in its PC-based OSs, and with this week's Consumer Electronics Show (CES) preview of a new product called Freestyle, Microsoft has made a credible and exciting case for moving PCs out of the office and into the family room.

Freestyle is the code name for a set of digital-media technologies that enhance and extend the core experiences in Windows XP, making an upcoming generation of stereo component-like PCs possible. The idea is to segregate popular digital-media tasks between the now-standard mouse-and-keyboard-style operations (e.g., editing photos and ripping CD audio) and what Microsoft calls 10' operations--tasks that are easier to perform from a chair in the living room using a remote control. Freestyle's software component adds a front-end UI to XP that lets you manage and play digital music, view digital photos, and perform a wide range of video and TV-oriented functions, including DVD playback, Digital Video Recording (DVR), and watching and pausing live TV. The company expects most people to use Freestyle in the living room, on a TV set, rather than in an office, using a computer monitor. And the 10' tasks work with a standard remote control, tying together functions that previously required several devices.

"The PC is moving out of the home office and into the den," eHome General Manager Kevin Eagan said during a Freestyle preview yesterday morning. "[Freestyle] offers a complete UI for what we call the 10' experience, and it extends the attraction of the PC. It works with a remote control for 'consumption mode' only; I don't want to edit home videos with that."

Microsoft remains coy about availability: The form and timing of Freestyle's release is a secret. Freestyle will ship before Longhorn (the next release of Windows), so it isn't necessarily waiting on a new Windows version. We theorize that Freestyle will be available in some form before the end of the year, and that it will ship in one of two versions. The first scenario is a Freestyle-enabled version of XP that would ship only with new consumer-oriented PCs beginning this fall; this strategy would mirror the way that Tablet PCs will ship with a specialized version of XP. A second possibility is that Microsoft will release a Freestyle add-on pack for XP users or a new version of XP that includes the technology out of the box (you might think of this theoretical release as XP Second Edition).

Microsoft's plan for a new generation of PCs could blur the line between the home-office PC market and the more open-ended and lucrative consumer market. A new generation of PCs will accompany this change, which will blur the line between today's beige boxes and the stereo components consumers already feel comfortable with. Contrast this approach with Apple's digital-hub strategy, which also revolves around a PC (in this case a Macintosh) at the center of a person's so-called digital life. Apple's recently announced flat-screen iMac is stunning, perhaps, but it's still the same old PC, a standalone device that's more at home on an office desk than in your living room. The Freestyle PCs we'll see this year are much more than that; they will expand the dominance of Windows beyond the traditional PC market. Now would someone please explain to us why Time Magazine featured the iMac, and not something more relevant, on its cover this week?