Speaking at the opening of Comdex Fall 2001, Gates provided a concrete example with the Tablet PC, which uses a touch screen and a forthcoming version of Windows XP. The device, unveiled as a concept last year, was shown in prototype form Sunday with examples from Compaq Computer, NEC, Toshiba, Intel and others.
One of the devices resembled an Etch A Sketch, while another looked more like a notebook PC with a screen that could be rotated to sit on top of the keyboard. One was small enough to be considered a handheld.
Microsoft also announced the name of the software that powers the Tablet PC: Microsoft Windows XP Tablet Edition. Gates said the company hopes the devices will be commercially available in 2002.
"Next year I hope a lot of people in the audience will be taking their notes on a Tablet PC," Gates said.
The Tablet PC is a pen-driven, fully functional computer that converts pen strokes into graphics that can be handled in ways similar to ordinary computer type. Although the computer doesn't recognize specific words in "ink" mode, it distinguishes between words and pictures. In handwriting recognition mode, the Tablet PC does its best to make words out of what is written. It also lets people perform some word processing-like tasks, such as inserting space between lines, copying text or boldfacing pen strokes.
Some of the devices will be about the width and length of a legal-size pad of paper, measure between 1.5 inches and 2 inches thick, and provide a color touch screen with a resolution sharp enough to allow people to read electronic books.
Gates said the Tablet PC and other advances would help ensure that technology remains relevant.
"In the decade ahead, we'll provide over twice the productivity improvements we did in the '90s," Gates said.
Gates' keynote address was his first major speech since Microsoft and the Justice Department agreed to settle a historic antitrust case in which the software giant was accused of using its operating system monopoly to thwart competitors in other markets.
Gates on Ballmer's "energy"
Although Gates' speech included somber references to the events of Sept. 11, it also had lighter moments, including the annual humorous video.
The video, which spoofed "Entertainment Tonight," included a duel with Gates as fictional wizard Harry Potter and Microsoft CEO Steve Ballmer as Luke Skywalker, as well as scenes from a fictitious Xbox game, "Matrix: The golden years."
However, the piece de resistance was Microsoft's own remake of the "Monkey Boy" video in which Ballmer dances wildly to cheer on developers.
Gates put a positive spin on Ballmer's performance, saying it was just what the company needed for the next 10 years, what he dubbed "the digital decade."
"It's going to take a lot of energy to meet the challenges of the digital decade, and it looks like Steve's got enough energy for all of us."
Gates pledged to try to limit the amount of references to Microsoft products, but then quipped, "I want to welcome you to Comdex XP."
Indeed, Gates' speech comes during a busy week for Microsoft. The Xbox video-game console debuts Thursday, and Gates also makes a cameo on the 200th episode of the TV sitcom "Frasier," which airs this week.
As for the company's recently released Windows XP operating system, Gates noted that the company has sold 7 million licenses in the first two weeks, with retail sales of the software more than two times those for any previous version.
Xbox: Demo and freebies
Gates showed off the Xbox, getting it up and running with only a few seconds' effort.
"We've got to do this with a PC," Gates said of how easy it was to use.
Microsoft showed off games for the device, including "NFL Fever 2002," a game the company bills as designed to be so real that players will be "afraid of the opposing team's linemen."
Gates got the loudest cheer when he gave away a free Xbox to four members of the crowd. The Xboxes were located under the audience members' seats at the MGM Grand Hotel's stadium.
In other news, Microsoft representatives said the company will officially launch its Visual Studio.Net software development tool with an event in mid-February.
The tool, which will be sent to manufacturers for production by year's end, is crucial to the company's new .Net software strategy to make its Windows operating system and existing software available over the Web for PCs and handheld devices. Visual Studio.Net will allow people to write and build Web-based software and services.
Gates also said the company this month will release a third test version of its forthcoming Windows operating system for businesses, called Windows .Net Server.
Separate from Gates' speech, National Semiconductor unveiled its own concept device. Dubbed Origami, the unit folds and twists into different gadgets, including a digital camera, video camcorder, smart phone, MP3 audio player, personal digital assistant, Internet access device and videoconferencing terminal.
The unit has a a 4-inch TFT screen, a built-in microphone and speaker, National Semi's Geode SC3200 chip, Bluetooth wireless connectivity, a USB port, and a Compact Flash expansion slot. It uses the Windows XP Embedded operating system.