Since September we've known that Windows Live would be replacing some built-in Windows applications with the release of Windows 7. At PDC, we got further details: Microsoft is making this move in order to eliminate confusion between having similar applications (Windows Mail and Windows Live Mail for example), to avoid any potential lawsuits for stunting competition, and to be able to release and update these programs without having to tie their timelines to the operating system. The Windows Live applications, Family Safety, Mail, Messenger, Movie Maker, Photo Gallery, Toolbar, Writer, as well as Microsoft Office Outlook Connector, will be bundled under the moniker "Windows Live Essentials."
We also learned at PDC that Microsoft will encourage (read: not force) OEMs to include these applications with Windows 7. If they do not, or if you purchase Windows 7 from a retail store, you will not be getting the Windows versions (nor the Windows Live versions) of Movie Maker, Photo Gallery, and Mail. I've heard many speculations on how Microsoft will be pushing Windows Live Essentials to consumers, all of them false: forced bundling, the option of installing them during the Windows 7 setup, and other sneaky forms of installing software. The truth of the matter is that Microsoft will take the same approach it has before: download links.