I’m at Microsoft PDC in Seattle. The keynote, introduced by CEO Steve Ballmer, started with a recap of the company’s success with Windows 7 – 240 million sold, we were told, and adoption plans among 88% of businesses – and showing off Windows Phone 7 (all attendees will receive a device) and Internet Explorer 9.

IE9 guy Dean Hachamovitch demonstrated the new browser’s hardware acceleration, and made an intriguing comment. When highlighting IE9’s embrace of web standards, he noted that “accelerating only pieces of the browser holds back the web.” It sounded like a jab at plug-ins, but what about Microsoft’s own plug-in, Silverlight? A good question. You could put this together with Ballmer’s comment that “We’ve tried to make web the feel more like native applications” as evidence that Microsoft sees HTML 5 rather than Silverlight as its primary web application platform.

Then again you can argue that it just happens Microsoft had nothing to say about Silverlight, other than in the context of Windows Phone 7 development, and that its turn will come. The new Azure portal is actually built in Silverlight.

The messaging is tricky, and I found it intriguing, especially coming after the Adobe MAX conference where there were public sessions on Flash vs HTML and a focus in the day two keynote emphasising the importance of both. All of which shows that Adobe has a tricky messaging problem as well; but it is at least addressing it, whereas Microsoft so far is not.

The keynote moved on to Windows Azure, and this is where the real news was centered. Bob Muglia, president of the Server and Tools business, gave a host of announcements on the subject. Azure is getting a Virtual Machine role, which will allow you to upload server images to run on Microsoft’s cloud platform, and to create new virtual machines with full control over how they are configured. Server 2008 R2 is the only supported OS initially, but Server 2003 will follow.

Remote Desktop is also coming to Azure, which will mean instant familiarity for Windows admins and developers.

Another key announcement was Windows Azure Marketplace, where third parties will be able to sell “building block components training, services, and finished services and applications.” This includes DataMarket, the new name for the Dallas project, which is for delivering live data as a service using the odata protocol. An odata library has been added to the Windows Phone 7 SDK, making the two a natural fit.

Microsoft is also migrating Team Foundation Server (TFS) to Azure, interesting both as a case study in moving a complex application, and as a future option for development teams who would rather not wrestle with the complexities of deploying this product.

Next came Windows Azure AppFabric Access Control, which despite its boring name has huge potential. This is about federated identity – both with Active Directory and other identity services. In the example we saw, Facebook was used as an identity provider alongside Microsoft’s own Active Directory, and users got different access rights according to the login they used.

In another guide Azure AppFabric – among the most confusing Microsoft product names ever – is a platform for hosting composite workflow applications.

Java support is improving and Microsoft says that you will be able to run the Java environment of your choice from 2011.

Finally, there is a new “Extra small” option for Azure instances, aimed at developers, priced at $0.05 per compute hour. This is meant to make the platform more affordable for small developers, though if you calculate the cost over a year it still amounts to over $400; not too much perhaps, but still significant.

Attendees were left in no doubt about Microsoft’s commitment to Azure. As for Silverlight, watch this space.