Ars Technica reports that evidence mounting: Windows 7 going modular, subscription. Here's a taster:

So, Windows 7 will be modular, but to an unknown degree. I personally expect the modularization to focus on value-adds, as did Anytime Upgrade on Vista. It allows Microsoft to draw lines between what is and isn't "in" the OS for DoJ compliance issues. Whether it be Live Services, Windows Media Player, or even Internet Explorer, Microsoft could roll those into modules and then say, "Hey, look, that's not part of Windows, we're charging extra for that!" Foley says that she's heard from sources that Microsoft is working on a Photo + Mail + Video module that would exist apart from the OS, for instance. I've heard less specific groupings myself.

Is a modular world a better one? For those of us having to manage software rollouts to scores of desktops, this would be yet another tool in the toolbox. Microsoft could create "desktop roles" like "information kiosk" that includes a stripped-down feature set, for instance. Microsoft can also add/remove functionality module by module. New modules could be sold post-launch, keeping revenue streams strong. In fact, modules could be maintained independent of OS versions. Microsoft could create a "Live Services" module that is maintained by a dedicated team, designed to work across multiple OSes, yet provide a completely consistent experience. A modular approach could also allow the company to make functionality available on a time-limited basis, potentially allowing users to "rent" a feature if it's needed on a one-off basis. Note that Microsoft is already testing "pay as you go" consumer subscriptions in developing countries.