With Microsoft busily building data centers across the globe, this is an interesting move for them. They get the expertise of a data center guru for their internal needs, plus the use of his research to help customers do the same with their own datacenters.
From Dan Reed's blog post, he explains his new role:

At Microsoft, my primary charge will be to explore new approaches and designs for large-scale data centers (See Life in the Clouds), both hardware and software. What features will be needed to support emerging and unexpected new applications? How do we optimize power and efficiency? What are the appropriate hardware and software interfaces? How will computing clouds evolve to empower next-generation applications? (To put this in perspective, this week, Microsoft announced $1B in new data center investments in Chicago and Dublin.) In addition to large-scale data centers, I will also be working on software models and tools to support large multicore (manycore) systems.

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