One of the most interesting things I've seen from Microsoft in the last year is being pitched as the latest, greatest digital advertising platform. This after Bill Gates described for an audience of advertisers this morning the decline of traditional media business models.

I reported on Photosynth last August, a photo-viewing application that combines technology from University of Washington, Microsoft Research and a Ballard startup called Seadragon Software that Microsoft acquired in late 2005.

A quick reminder of what Photosynth is: The software organizes sets of pictures of a specific thing or place, such as St. Mark's Square in Venice, Italy. It matches up elements the photos have in common and uses that information to build a rudimentary three-dimensional map of the space, calculate the position from which each picture was taken and place each in the appropriate 3-D context.

Fluid navigation allows the user to glide from photo to photo and click on a specific element, a mosaic for example, to see other photos that contain the same element. It's like viewing a nonlinear slide show: The user has the freedom to move about the space and view the pictures in any order. It's a bit closer to actually being there. You can learn more about it and check out a preview here.

"This same technology can serve as a way of surfacing an entirely new form of advertisement," Microsoft technical fellow and Live Labs boss Gary Flake told the audience at the company's Strategic Account Summit this afternoon.

We've seen the zooming technology from Seadragon incorporated with Silverlight, the new Web-based video platform Microsoft is pushing. In examples here and at the Microsoft Mix conference in Las Vegas last week, it was used to smoothly zoom in to a super-detailed advertisement or high-definition image starting from a small thumbnail. It could be used to repurpose complex print ads on the Web, company executives have said.

Flake showed a "Photosynth" environment of a commercial space -- a home fixtures store with faucets, cabinets and other hardware.

"I can work my way around the space, navigate around, take a step back," he said, demonstrating the application, which runs in a Web browser. "Maybe there's a sink over here. I can look at that."

On the left, the program displayed Web content that changed to correspond to the specific products he zoomed in on in "the store."

"We've effectively created the ability to place hyperlinks from your physical store to your online store," he said.

The application is a step toward a vision of three-dimensional Internet that Microsoft has articulated for other products, such as its Virtual Earth mapping application. Eventually, these applications could be combined to allow you to "travel" through a three-dimensional rendering of the real world to find a store -- in its actual location -- and then go shopping there.

Flake put it in the context of online virtual reality worlds such as Second Life, where people navigate a made-up world in the guise of whatever avatar they want.

"This is maybe properly referred to as one-and-a-half life," Flake said. "It's consistent with physical reality, but also has the ability of being combined with the Internet and the Web content that's already there."