Steven Sinofsky, senior vice president of Windows and Windows Live engineering, is on stage now demonstrating the "net book" on which he's running an early version of Windows 7. It has a 1 gigahertz processor and 1 gigabyte of RAM. And only half the RAM is being used as he boots the machine, Sinofsky said.

"I'm pretty excited about this class of machine and the work we can do to deliver Windows 7 on those machines," Sinofsky said.

Update, 10:37 a.m.: Here are several other key points from Sinofsky's presentation:

Schedule. Microsoft hopes to release a beta version of Windows 7 early next year, Sinofsky said. The company isn't providing additional detail on the release schedule right now. Sinofsky said during Windows 7, the target for each subsequent development milestone has been set when the previous one is reached. As for the big picture, "We think three years from the general availability of Windows Vista is the right time to release Windows 7," he said. That would be January 2010.

Touch. Sinofsky and Julie Larson-Green, vice president of Windows Experience, demonstrated the multi-touch controls in Windows 7. Using these will require a touch-sensing PC, such as the H-P TouchSmart. Larson-Green said there is 25 percent more space between items on a "jump list" of recently accessed files, for example, to make them easier to "click" with a finger. Touch will work with applications that were designed for it -- including Internet Explorer -- and in those that we're not because Microsoft has "repowered" all the mouse commands in Windows 7 to understand touch. So, you can scroll up and down a Word document by dragging your fingers across the screen and zoom in by pinching your fingers together on the screen.

New controls. The task bar that holds open windows is being updated to be more flexible -- allowing people to put open windows in any order they chose, something not possible before Windows 7. The new task bar also includes elements of the "quick launch" buttons in earlier Windows versions. Frequently used programs sit on the task bar and a thumbnail view of a program's open windows pops up when you hover a mouse over the task bar icon. Other improvements are designed to make organizing open windows side-by-side to make copying between two documents easier, for example.

Networking. "Home networking has been around since Windows 3.11 in Windows for Workgroups," Larson-Green said. But not many people -- perhaps with the exception of the software developers in the audience -- have been able to make it work, she said. Windows 7 will automatically create a "Home Group" of networked PCs, printers, wireless photo frames and other devices. Documents, music, photos and other media stored in "libraries" on any of the networked PCs and devices can easily be searched and accessed from another Windows 7 PC on the network. A new PC, such as your work laptop, will automatically be added when it's brought within range of the network, but it can be easily set to limit access to work files and respect other corporate security rules. The system will also automatically switch the default printer to the one on your home network when you're at home.

Security. A big annoyance to users of Windows Vista is the User Account Control feature that pops up notifications designed to protect them from malicious software. The pop ups became too frequent for many people, who subsequently turned off the UAC feature. Windows 7 has an "Action Center" where PC security messages can be stored until a person is ready to read them. PC performance information is stored there, too.

Applets. "We've also decided that once every 15 years or so we're going to update the applets in Windows," Sinofsky said, showing off his bone-dry wit. That means updates to Calculator, Paint, WordPad, which will now support open document formats including Open XML and ODF.