It works like this: You enter a product category, e.g. the www with a browser. Let's call it Internet Explorer. This is the embrace part, when you enter the area, seemingly on fair terms. But then, when your browser has become widespread, then you start to add proprietary abilities to it. Let's call it ActiveX for example. These new features does of course implement functionality not found in competing products, like other browser, and therefore companies will start to use this closed technology, for example for online movie rental. But wait, isn't this a great thing, adding features to browsers.. Sure, except the technology added is closed, so no other browser can ever support it. And then, we enter the final stage. Since the MS browser now has all these features not supported by other browsers and there is a de facto monopoly in some areas of browser technology, like DRM video.. this gives MS the power to extinguish the competition. And this is why IE is the most widespread browser in the world... E.E.E.
In 2004, to prevent a repeat of the "browser wars," and the resulting morass of conflicting standards, Apple (makers of Safari), Mozilla (makers of Firefox), and Opera (makers of the Opera browser) formed the Web Hypertext Application Technology Working Group to create open standards to complement those of the World Wide Web Consortium. Microsoft has so far refused to join, citing the group's patent policy, which requires that all proposed standards be possible to implement on a royalty-free basis.
But why do they do this? It's not like they need the money, and IE is a free browser..so no money to make there. The thing is, the business strategy utilized by Microsoft is based on markedshare. Unlike other companies like Apple and Sun, which base their business plan on profit, Microsoft move money around from areas where they make the money to areas where they loose, all to gain markedshare. The idea is to run competitors into the ditch using size and brute force, effectively creating a closed standard like in the case of Microsoft Office. This way Microsoft don't have to worry about the profitability or quality of their product, people have to buy them, cos there is no other alternative.