It looks like those plans for Microsoft's iPod rival were further along than anybody thought. Microsoft's been having licensing talks with the music industry in order to provide songs on their iTunes-killer service. The service will emphasize pay-per-song purchasing, like iTunes, but will still offer a subscription service, like Napster.
People who have seen the device demoed and said the iTunes-competitor was actually better than iTunes. The man previously in charge of Microsoft's Xbox division, Robbie Bach, is taking the reins of this project. No idea on when the device or the service will be released.