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The demo, overseen by both CEO Steve Ballmer and Chief Software Architect Bill Gates, was shown at the annual D Conference hosted by the Wall Street Journal.
The duo said the software would ship in late 2009. Microsoft has been coy on the development of Windows 7, at times even refusing to acknowledge it was working on such a product. But Ballmer and Gates ended all the speculation, showing multi-touch screen technology that lets users move around photos or move, resize and open windows by placing their hands on the screen.
Microsoft has posted a video of the technology on its Vista blog site.
The touch technology is similar to that in Microsoft's Surface table top interface, which Gates showed last year at the same conference.
PCs will need screen digitizers to make the technology usable, according to a report on the demo by Barrons. Touch, however, would be an alternate input device and will not replace the mouse or keyboard.
Ballmer said Windows 7 would include a lot of technology with the goal of producing a "fantastic PC," according to Barron's.
Despite the cone of silence around Windows 7, led by Steven Sinofsky, the new senior vice president of Windows and Windows Live engineering, the company has been slipping out bits and pieces of information about the operating system for the past 12 months.
The snippets include information early last year from Gates, who outlined planned integration between Live Services and Windows 7 in an interview with Newsweek magazine. The integration would allow a user's information and desktop configurations to follow them by storing it in the cloud. He also said digital ink and speech would be prominent in Windows 7, as would parallel computing. He added that performance improvements were coming along with data synchronization capabilities for users with multiple personal computers.
Microsoft also has hinted that the operating system will be more modular and allow for different configurations at installation similar to the way Windows Server 2008 lets users tailor deployments
to meet specific needs, such as DNS or file serving.
Given the late 2009 timeframe for release of Windows 7, experts are speculating that it will be more of an upgrade to Vista rather than a replacement for the operating system that has sold 150 million licenses despite criticism from some media outlets and users.
Read more about software in Network World's Software section.