LAS VEGAS—Microsoft kicked off the International Consumer Electronics Show (CES) Monday night here much as the company has done since its first CES keynote in 1998—extolling the virtues of Windows and promising big things from its operating system in the future. But with the recent rise of smart phones and tablets that run competitive operating systems from Apple and Google, Microsoft has increasingly been on the defensive, forced to distinguish itself from technologies that seem to have leapfrogged Windows in relevance.

In what was to be the company's final CES keynote, Ballmer, joined by American Idol host Ryan Seacrest and several Microsoft colleagues, promoted the success of Windows 7 both on desktops and mobile devices and provided new details on its upcoming Windows 8. The latest version of the operating system, which developers have been able to tinker with since September, will run across a variety of gadgets, including mobile phones, PCs and the emerging "ultrabooks" category of thinner, lightweight laptops.

Windows 8 will roll out to consumers throughout the year as computer and phone makers introduce their latest Windows devices to the market. Ballmer called Windows 8 a "reimagination" of Microsoft's flagship operating system. Indeed, it will support wireless devices that use low-power ARM microprocessors—designed specifically to improve mobile gadget battery life—in addition to the standard processors from Intel and AMD that Windows has supported for years.

Another key Windows 8 feature is its "Start Screen" interface that enables it to be used on touch-screen devices such as tablets as well as mouse-and-keyboard PCs. Based on Microsoft's demo, the Windows 8 operating system shares the look and feel of iOS and Android, which offer apps that take users directly to functions such as e-mail, the Web and sites such as Facebook and Twitter.

Computer makers are showing strong support for Windows 8: Acer, Asus, Dell, HP, Lenovo, Samsung and Sony are just some of the companies introducing new computers that will use the operating system. And by the end of February, Microsoft will open a Windows app store it hopes will rival online shops already offered by Apple and Google.

The question for Microsoft is whether the PC platform itself will continue to dominate. Tablets such as Apple's iPad, Samsung's Galaxy and even Amazon's relatively low-priced Kindle Fire are becoming increasingly popular for capturing and viewing video, managing e-mail and a variety of other tasks that once required PCs. Smart phones such as the iPhone and a growing number of Google Android-based handsets can likewise replicate a number of PC functions, with the exception of the Windows bread-and-butter Word, PowerPoint and Excel applications.

In step with the software upgrades, Microsoft refuses to concede the smart phone market. It has been making a play there with the Windows Phone version of its operating system, and the company last year launched a partnership with Nokia. During his keynote, Ballmer introduced the first Nokia handsets to run Windows Phone, including the 4G Nokia Lumia 900 operating on the AT&T LTE network. Ballmer likewise showed off a new Windows Phone from HTC that features a 16-megapixel camera. Both smart phones will be available by the end of the year.

Despite the shiny hardware, Ballmer's keynote served to show just how difficult it is to distinguish products in today's smart phone market. Some Windows phones feature front-facing cameras for mobile video calls and voice-activated controls, but these features are already available on the iPhone and several Android phones.

More impressive than Microsoft's almost obligatory enhancements in mobile computing and smart phones was the company's plans for its Xbox video game system and Kinect motion-sensing technology. Microsoft continues to transform Xbox beyond gaming into a full-fledged online entertainment and social-networking system for televisions. Kinect will also enable "two-way" television, letting people interact directly with TV programs. This was demonstrated through Kinect Sesame Street TV, a special version of the popular children's program. During the demo, a girl onstage used the Kinect sensor to toss virtual coconuts onscreen to the Muppet Grover and also to dance with Elmo.

Microsoft expects two-way television to be available by the end of the year. Interactive TV isn't a new concept—IBM was talking about this at least 20 years ago, for example. Yet the success of Microsoft's Kinect motion-sensing technology thus far gives this particular prognostication some credibility.

Suspicious for its absence in Ballmer's presentation was much talk of Microsoft's recent $8.5-billion acquisition of Skype, done ostensibly to add video chat to Windows and match the success of the iPhone's FaceTime and Android's Google Talk applications. Ballmer mentioned Skype in passing toward the end of his keynote but did not elaborate on the company's plans for the technology.

Regarding Microsoft's departure from CES, Consumer Electronics Association CEO Gary Shapiro said prior to Ballmer's keynote, "We agreed to a pause." He added, while standing onstage next to Ballmer, that he expects Microsoft will be back at CES at some point. Ballmer neither disagreed nor said much else on the matter.

Image of the Las Vegas Convention Center courtesy of Larry Greenemeier