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He also talked about how Microsoft is intending to make media-based software, the Xbox game console and electronic gadgets connect more easily to each other to deliver a better high-definition entertainment experience.

The keynote speech by Gates came two days before Google, Microsoft's rising rival, held a keynote speech of its own.

For the past five months, the media has been focusing on the intense competition between Microsoft and Google. Recently, Microsoft sued Google for hiring Kai-fu Lee to head its research operation in China, accusing it of violating a non-competition agreement. The two industry giants settled the case out of court. A couple of days earlier, Google scored a $1 billion contract with America Online, beating out Microsoft to the deal.

Rumours are currently circulating that Google is ready to unveil a Google-based personal computer or software that would compete with Windows desktop software, Microsoft's heart and soul.

During his speech, Bill Gates downplayed the threat posed by Google by saying IBM was a greater danger to Microsoft. "IBM has always been our biggest competitor. The press just does not like to write about IBM. The biggest company in the computer industry by far is IBM. They have four times the employees I have, way more revenues than I have", he said.

For now, Microsoft is focusing on expansion and progress in digital entertainment and services and implementing their Windows platform to various electronic devices.

As a start, Microsoft has entered a partnership with satellite television service provider DirectTV to implement the company’s satellite video into Media Centre-based personal computers. According to Gates, 6.5m Media Centre-based personal computers were sold worldwide in 2005.

Microsoft is also working hard to satisfy demand for the Xbox 360. By the end of June, Microsoft shipped between 4.5m and 5.5m consoles to ease the shortage caused by the holiday season.

Additionally, sometime in 2006. The operating system will feature better and improved searches for data and music videos, as a file's metadata can be changed whenever the file is saved or opened. The system will have an updated version of the media centre allowing users to play or record television programmes from any personal computer in the house.

Vista has also taken parental control into consideration -- allowing parents to specify which games their children can play and when and for how long they can play them.