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"Microsoft says the restriction is designed to ensure that users get the best possible performance from limited netbook hardware."

Because being able to run more than three applications at once makes your hardware less efficient?

(EDIT: To be fair, I suppose that having a low fixed number of applications could let you pull off some useful optimizations. However, most of those optimizations seem like they would significantly change the OS architecture, so I doubt that Microsoft performed them. Maybe they did, though.)

Netbooks are much more powerful than the hardware used in the G1 Android phone, and Android gives a pretty good impression of running every possible app at once (if apps are written to save state) even though the constraints of the device and UI limit it to about 6 apps active at once. If an app is removed from memory because it hasn't been in the foreground in a while, they usually pick up right where they left off when they are restarted, and it doesn't even look like they had to be restarted. Microsoft won't do this with Windows though, because it would break backward compatibility and change the user experience consistency that is the bread and butter of their Windows sales.
I think Microsoft is going to catch a great deal of flack for this one. I can't imagine how they came up with the idea that people use 2 apps at a time on average. Even if this is true on average, every user will at some point want to use more than 3. Being told by your computer you can't do so will infuriat Windows. And windows can't afford to infuriat its users. Not its users who only stick around because the environment is so comfortable.

This move has another interesting consequence. The simple hack for beating this limit is to use your web browser for everything possible (which is actually almost everything). Are starter users going to wind up using google docs instead of office to save having an extra application open?

It also says this will only be sold in none-developed markets. It's a way of selling cheap(free) copies of windows in China/India to reduce piracy while still protecting the market of business customers.
Oh, I actually hadn't noticed that part. Honestly I think a 3 app limit will anger pirates so much that their propensity to pirate will be just as high as if they didn't have the option for the cheap to free version. Microsoft's methods of price discrimination are less dimwitted than we give them credit for. But I think this one really is as bad as it seems.
That might apply in a developed environment where piracy is essentially free aside from bandwidth. We're talking a 'buy bootleg CD from the local market' type of piracy, where price competition + some benefits may be a tenable strategy. People aren't pirating out of anger or stinginess - they're pirating because the official discs are a month's salary.
Fast forward to Windows 8 starter edition, where windows limits you to 3 browser tabs.
We really would know when they announce pricing. In any case, Windows Starter is crap.
I think the multiple versions are daft, there should be two versions — Home, and Pro. You're not giving people who can afford it the choice of a more feature filled (or in this case, less limited) OS, you're just giving the people who can't afford it half an OS.

Until I can find a decent explanation to why the world needs six versions of Windows 7, I'll have to say Microsoft have done it for one reason — money, which is a shame really...

I'm not being snide or smug here (just a disclaimer). If anything, i'm 100% dead serious and curious about this:

Who did, how many did, and why did so many people think this was a good idea? Microsoft isn't a small company, and i'm sure tons of people have to review a decision like this. How did no one pick up that this would be a horrible idea? At least test the waters on it. I barely use desktop apps, and i still have quite a few open now:

-Firefox, ichat, itunes, mailplane, and textedit

Do apps like last.fm, dropbox, etc. count as apps? If so throw that on there too.

So what if my apps live in the taskbar? Can I still only run 3 at once?

I honestly cannot see any benefit for the end user from this restriction.