The next version of Windows is going to run on ARM processors—the same kind of chips that's inside a bajillion smartphones and tablets right now. Which means the future of Windows isn't just PCs anymore.
What does this mean?
Well, most simply, it means the full Windows shebang you know and love (or loathe) from your PC can now natively run on tinier computers that use way less power—specifically ones using ARM chips that are common in smartphones right now. Think tablets. And other wacky, smaller form factors. But you know, with all-day battery life, thanks to these ARM chips.
So all of my Windows apps will just work on this new, mobiler Windows?
Ehhh. Microsoft wouldn't say how or if it would happen, but ominously, Head Windows Dude Sinofsky noted "It's definitely the case that x86 programs [i.e., the ones on Windows now] don't run on ARM."
And to get those running, Microsoft won't be using "virtualization or something like that," since the low-power ARM chips aren't really suited for that kind of work. Microsoft's own demo apps, like Office, have been recompiled to run on ARM. Which means either Microsoft has another trick up its sleeve (hopefully) to run current x86-compatible programs on this new, ARMier Windows, or it's not going to happen, so you'll have to get new version of programs. Another point is that devices won't just work either—-manufacturers are gonna have to write new drivers for 'em.
Is regular old Windows going away?
Nope. It'll run on old-school x86 chips from Intel and AMD and the like. It'll just run on these ARM chips too. How Microsoft is going to differentiate them, from the branding to the interface to the features, we don't know yet. Microsoft is very much emphasizing that this is just a "tech demo" to show that they have Windows running on ARM chips right now.
Does that mean the sweet Windows Phone OS won't be on a tablet?
Probably not. The Microsoft philosophy is, "Small screen is windows phone. These screens are Windows 7." So the future of tablets (and other things with slightly-bigger-than-phone screens) for Microsoft is very much still Windows. Conversely, it means for the future of Windows isn't just PCs anymore. Though we're not exactly sure what that means yet.