Silverlight is Microsoft's attempt to compete with the all dominating Flash plug-in from Adobe by providing a browser plug-in to deliver Flash like vector graphics, animation, video and sound.
It seems to extend an all round assault from Microsoft on Adobe and their domination of the web design software marketplace. Microsoft is copying the software model from Macromedia (acquired by Adobe) where their free Flash plug-in has become virtually ubiquitous on the web and revenue is created from the sale of development tools to create content for the Flash plug-in.
The hurdle Microsoft face is ensuring the penetration of their plug-in can match the high levels (98%) of the Flash plug-in. It'll be interesting to see whether Microsoft are able to / decide to release the plug-in as an update to IE7 or Windows and therefore kick start their penetration figures quite considerably.
In true Microsoft style the Silverlight plug-in seems to cause some nasty problems with Firefox, consistently crashing the browser when any Silverlight content can be found on the page. Plus the plug-in itself is fairly sizeable compared to Flash at 2MB (Flash is around half the size). That said competition is only a good thing and I'm glad to see that Microsoft are prepared to challenge Adobe in this arena.