In a blog post late Monday, Microsoft said it will offer only two main options for Windows 8 on traditional PC processors — Windows 8 and Windows 8 Pro. Microsoft will also have an enterprise version for large businesses with volume-licensing deals.

The big change with Windows 8 is an all-new version for computers running the ARM-based chips more commonly found on smartphones and tablets than in full-fledged computers. That flavor, known as Windows RT, includes a version of Office, but won’t be able to run other traditional Windows apps.

All flavors of Windows 8 will be able to run new-style Metro apps designed for the new operating system, but only Intel- and AMD-powered machines will be able to run older programs.

Microsoft didn’t disclose how much it will charge for the new Windows, nor would it confirm when the operating system will arrive, though it is widely expected later this year.

While still presenting consumers with several options, the move is a notable slimming down for Microsoft, which has in the past also had options like Home Basic, Home Premium, Starter, Ultimate, Media Center and Tablet PC Editions.

Redmond has come under fire in the past for offering so many different pricing options with Windows. Windows 7 had nearly as many versions as Windows Vista, though most customers were steered toward the Home Premium or Pro versions of the operating system.

And while it won’t have a “Starter” version of the operating system as such, Microsoft is doing much the same thing with Windows 8, adding it would have a “local-language-only edition of Windows 8” for China and “a small set of select emerging markets.”

That option gives Microsoft a way to offer cheaper prices in high-piracy areas while maintaining its profit margins in its more mature markets.

Microsoft also reiterated in the blog post that Windows RT will have many of the features consumers tend to expect from Windows, but won’t have some key business-oriented features, such as the ability to join a corporate domain.

That version also won’t contain Windows Media Player, the music- and video-playing app that has been a staple of Windows.

Windows 8, in all its versions, will come standard with Metro applications for managing email, calendar, photos, instant messaging, music and videos. In general, developers will have to distribute their Metro apps using a new Windows Store that is built into the new operating system.

A consumer preview version of Windows 8 was made available at Mobile World Congress in February and a near-final release candidate will follow at an unspecified date. Developers were given an earlier test version last fall.

Second, Amitabh Srivastava, head of Microsoft’s Azure cloud platform business, announced that he’s leaving the company. Srivastava, who joined Microsoft in 1997, was widely considered to be a possible successor to Muglia, but lost out to Nadella.

One of the few ever to be named a Distinguished Engineer at Microsoft–an honor now known as Technical Fellow–he was tapped, along with Brian Valentine, by then Windows chief Jim Allchin to take over the Windows engineering efforts in 2003 at a time when the operating system was being widely derided as plagued with security and other problems. Srivastava had his team draw up a map depicting how all the various pieces of the Windows source fit together. It was eight feet tall, 11 feet wide, and was described in a 2005 Wall Street Journal story as looking like a “haphazard train map with hundreds of tracks crisscrossing each other.”

Srivastava and Valentine are credited with the 2004 proposal to streamline how all those pieces functioned, a plan that would allow various features to be added or removed without disrupting the whole operating system. The idea was a partial response to the looming threat from Google, which that year had launched Gmail. The problem was their plan required throwing out a lot of legacy source code that had been in Windows for years, and starting fresh.

Srivastava’s changes included automating testing on features that had for years been done by hand. Code with too many bugs were sent to “code jail.” Over time, code flowing into what was to become Windows Vista improved.

We all know what happened with Vista–it too was widely panned. But the engineering processes put in place had a lot to do with the many improvements that appeared in Windows 7.

Srivastava then moved on to a new Microsoft project in 2006, code named Red Dog, now known as Azure, which launched in 2008. From this he pivoted to running the server and cloud division, overseeing Microsoft’s relationships with enterprise and data center customers.

People I’ve been talking to who tend to know a lot about the internal politics at Microsoft say this isn’t the last of the changes. Now that Muglia’s replacement has been announced, Nadella is going to want to name key members for his team, which means that those not tapped will probably choose to leave as well. The management shake-up at Microsoft is not over yet.

Srivastava has a Ph.D. in computer science from Penn State, and was invited to deliver the commencement address at the school’s College of Engineering in 2008, which is in the video below. Key quote: “In the end, it’s all about execution.”

“The next generation of Windows is going to evolve on new hardware,” said Windows unit President Steven Sinofsky.

Before the demo though, Sinofsky traced the history of Windows, noting that from 1992 through Windows Vista the system requirements increased significantly from one version to the next. With Windows 7, though, Microsoft held most technical requirements steady and even lowered some of them.

As for the demo of the new stuff, Sinofsky began with a few caveats.

“We are calling this a technology demonstration,” he said, cautioning it wouldn’t show any new user face stuff or address pricing, timing, etc.

Sinofsky said it is too soon to talk about what requirements will be for the next version of Windows, but said the company is keenly aware of the need to have Windows running on ever-smaller devices.

Update 1:25 pm Microsoft has three demos and it is saving Windows on ARM for last. It’s starting by hoeing off some new PCs running on the current version of Windows–Windows 7.

The second demo will be an update of touch input on Microsoft’s tabletop Surface computer, and the final one will show Windows running on ARM.

1:33 pm The next-generation Surface is thinner and uses infrared cameras inside the screen’s pixels instead of a big projector, allowing for devices that can be either a tabletop or mounted vertically. It will be cheaper as well, though Microsoft doesn’t say how much the machines will cost. First-generation Surface machines had a price tag in the thousands of dollars.

On to the chip demos.

Microsoft starts by showing a development board using a next-generation Intel design running Quicken.

Okay, nod to Intel complete.

Next up is Office running on an ARM chip. This demo is on Microsoft Word and has it printing to an Epson printer. Microsoft shows demos of chips from Qualcomm, Nvidia and Texas Instruments.

On the Nvidia machine, Microsoft shows hardware, accelerated browsing in IE9 running on a Tegra 2 processor, as well as running PowerPoint and an “Iron Man” movie preview.

1:48 pm Asked by Mobilized what work still needs to take place to make Windows on ARM a reality, Sinofsky says that it is the case that programs compiled for x86 processors won’t immediately run on ARM chips, but said the company isn’t ready to talk about the programming model. He does say it is unlikely Microsoft would use virtualization to make old programs, suggesting there will be some work for developers.

Sinfosky says that Microsoft has done the work to enable Windows to run and create a framework for third parties to build software and device drivers.

As for the timing, Sinofsky doesn’t give a date, but does reiterate that Microsoft these days aims to have a new release of Windows every 24 months to 36 months. “I don’t think it’s that long away,” he says. He notes some people want Windows releases faster while other large customers would rather have more time between releases. “Somewhere [around] 24 to 36 months between releases seems about right.”

The ARM compatibility will go into the next release of Windows, but Sinofsky takes time to point out to Mobilized that once again, he isn’t calling it Windows 8.

“This is the next generation of Windows,” he says.

The company had planned to end XP downgrade rights with the release of Windows 7 Service Pack 1, which went into beta today, but it has reconsidered in light of the fact that 74 percent of its enterprise customers still use the OS. So today, Microsoft (MSFT) moved that end date further out once again. “Our business customers have told us that removing end-user downgrade rights to Windows XP Professional could be confusing, given the rights change would be made for new PCs preinstalled with Windows 7, and managing a hybrid environment with PCs that have different end-user rights based on date of purchase would be challenging to track,” Microsoft said in a post to the Windows Blog. “Going forward, businesses can continue to purchase new PCs and utilize end user downgrade rights to Windows XP or Windows Vista until they are ready to use Windows 7.”

In other words XP downgrade rights will continue until the end of the Windows 7 life-cycle. That means OEMs could still be selling XP-equipped PCs two years after the introduction of Windows 8, expected by early 2012–astonishing when you recall that the company originally planned to cut off sales of XP on Jan. 30, 2008, one year after Windows Vista debuted.

At the company’s annual meeting last fall, CEO Steve Ballmer claimed the operating system had sold twice as many units as any OS in a comparable timeframe, though he didn’t offer a hard number. Now, four months later, we have one: Microsoft has sold 150 million copies since the October 2009 launch. And that, as the company notes, makes Windows 7 the fastest-selling operating system in history, with seven copies of Windows 7 sold every second.

If there was pent-up demand created by the poor reception for Windows Vista, Windows 7 seems to have released it–in both the consumer and enterprise markets.

Two days after winning a $105.75 million jury verdict against the software giant, VirnetX has filed a new complaint claiming Windows 7 and Windows Server 2008 R2 infringe those patents as well. Those products hadn’t yet been released when VirnetX first went after Microsoft, so the company is now circling back, hoping to collect damages for their alleged infringement.

“This is a tactical and procedural post-trial action to ensure and protect our property rights as we proceed to final resolution with Microsoft,” Kendall Larsen, VirnetX president and CEO, wrote in a March 18 statement.

Microsoft (MSFT) has vowed to appeal the first verdict, which it described as “legally and factually unsupported,” and took a similarly dim view of the latest VirnetX assault. “Microsoft respects intellectual property, and we believe our products do not infringe the patents involved,” Microsoft flack Kevin Kutz told the Seattle Post Intelligencer. “Moreover, we believe those patents are invalid. We will challenge VirnetX’s claims.”

To that end, the company has petitioned the U.S. Patent and Trademark Office to re-examine the VirnetX patents, evidently with some success. In a preliminary review, the USPTO has found all but one of the VirnetX claims invalid. This doesn’t necessarily mean they’ll be rejected, but for Microsoft, it’s a step in the right direction.

And so, beginning on Feb. 22, Windows users in the U.K., France and Belgium will be presented with a ballot screen offering them an opportunity to swap out Internet Explorer for one of 11 other browsers from rivals like Mozilla, Apple (AAPL), Opera and Google (GOOG).

“The browser choice screen software update will be offered as an automatic download through Windows Update for Windows XP, Windows Vista and Windows 7,” Microsoft (MSFT) Vice President and Deputy General Counsel Dave Heiner explained in a blog post announcing the move. “The software update will be installed automatically, or will prompt you to download or install it, depending on which operating system you are running and your settings for Windows Update.”

Once that’s done, users will be shown a ballot screen offering the option of installing one of the listed browsers, learning more about them or postponing the browser choice to a later time. Simple enough–assuming that automatic updates is enabled and that they actually care about browser choice.

If that’s the case, many probably dumped IE for an alternative long ago, right?

Anyway, as I said, a limited ballot screen rollout begins next week with full-scale deployment across the rest of Europe a week later, potentially reaching some 170 million PCs. It will be interesting to see how many of them end up switching to a new default browser.

PREVIOUSLY:

• Microsoft Announces Windows 7 Neelie Kroes Edition
• Brussels Palace of Justice Apparently Has Only Single Courtroom
• Great Move, EC. Now We Have to Download IE Ourselves…
• If Windows Didn’t Ship With IE, How Would You Download Firefox?
• Microsoft’s Browser Move to Make Windows Even More Annoying
• European Commission Announces Microsoft Antitrust Fine Ultimate Edition™