At the TechEd yesterday, Quentin Clark, General Manager for SQL Server, delivered a session about the future of SQL Server for data and BI and moving towards the cloud in the upcoming "Denali" release.
There was a great demo by Roger Doherty that illustrates how well SQL Azure and SQL Server work together by making it much easier to move back and forth between on-premises and cloud utilizing improvements in the DAC Framework.
Additionally, new developer tools in "Denali", specifically SQL Server Developer Tools Codename "Juneau", provided a central point for developers to create database applications. Database edition and cloud-aware -- "Juneau" provides the one tool for any SQL Server or SQL Azure development.
Watch the video below in its its entirety, or skip ahead the SQL Azure demo starts at the 23:00 mark:
[Source: SQL Azure Team Blog]