Lots of valid points are being made here. I would like to add my view on windows 8 and its relation to (the dying?) PC. I've followed the developments quite closely, because this is the stuff that interests me, and at first I genuinely didn't understand what Microsoft was doing with windows 8. I thought Steve Balmer simply lacked any sense of strategy (in fact, it's well know he's not a "tech" person; he's a salesman. When new technology is shown to him he simply has no idea whether it's any good. There are some nice anecdotes with regards to this).
Now, to start with the rise of tablets and smartphones. They caused Microsoft to change tack with windows 8, so they're ultimately the cause of their new strategy. Apple is making extraordinary amounts of money with their ipad and iphone and google has had lots of succes in the smartphone market as well. Microsoft, in the meantime, had been making tablets and smartphones before (at least, they stimulated their partners to make products based on Windows XP and Windows Mobile, respectively) but they never caught on (simply because windows wasn't suited for touch and windows mobile was utter crap). Apple moved in with their iphone, which immediately caused quite a stir. They stimulated developers to develop apps in many ways, for instance by making it simple to publish them in their app store. This had another advantage: Apple took a share of the cut on all apps sold on their iphones. Developers made apps because Apple is a large company and would likely sell many phones, because the iphone was a nice gadget with a pretty decent OS. There is a mutually reinforcing effect: 1. more apps make the iphone more useful (any OS is only as useful as its functionality plus third party software), 2. which means more consumers buy it, 3. which means more people start developing for it because the market for apps expands. 4. GO TO 1.
Apple was making loads of money because the demand for iPhones (partly due to the large amount of apps) made them able to keep prices high and make a lot money on every iPhone sold, while they also made money on the large amount of apps sold in the market.
Google was already developing mobile software and released shortly after, stimulating app development and competing on price. Android began catching up with Apple; the number of apps available and (thus) the number of users came closer and closer. It is now the biggest mobile OS.
Microsoft, in the meantime, had completely missed the boat. Steve Balmer considered just about every development in software of "strategic importance", which meant MS was doing lots of things at the same time and lacked the money and focus to make any of them succeed (think Bing, Bing maps, social networks, MSN, Windows Mobile, skydrive). It funded these largely loss-making projects with the huge income generated by Windows and Office.
So what was Microsoft to do? They wanted to enter the growing mobile market, but how? They had a sucky mobile OS for which there was virtually no software. The problem is that in that case there is basically a self-fulfilling prophecy: few people use the OS -> no software will be developed for it -> few people use the OS &c. Even if MS made a good platform it would likely fail due to lack of apps and userbase. They did make a good mobile OS, Windows Phone, and indeed it absolutely failed to gain any kind of traction in the market (despite positive reviews).
In the meantime, mobile devices were not just making Apple and (to lesser extent) Google a lot of money, they were also threatening the position of the PC/Windows and Microsoft as a whole, especially when tablets were introduced. Tablets and smartphones can do some of the stuff computers can do, like simple browsing and e-mailing and casual games. Especially netbooks and, to lesser extent, laptops were threatened by this development. Some people only need to do the simple stuff.
But this isn't just about expanding markets (mobile) or contracting markets (PC). The popularity of Apple's devices also threatened the hegemony of Windows in the desktop/laptop market: by making people get used to a different interface and company, they may also be more likely to switch to the desktops and laptops of that company. While iOS and OSX are still different environments, Apple is integrating the two. By making iOS apps available on OSX and vice versa, Apple could also become far more attractive and thus bigger in the PC market.
MS now had two problems to tackle: while they had finally produced a good mobile OS (without a sizeable market share, however), tablets had become popular. MS had nothing to compete in the tablet market and was failing in the smartphone market.
MS clearly required an alternative solution. Just making a good mobile OS for tablets and smartphones wasn't going to cut it due to a lack of software due to a lack of market share due to a lack of software.
What I personally though MS should do was port windows software to tablets. They could either release tablets based on the x86 architecture or tablets based on ARM or both. Apps could work on x86 without porting, but it would be required to adapt their interface. Make a simple version of Windows, suitable for touch, which requires few system resources to run smoothly (cutting features from the full Windows isn't going to cut it, a new version is needed. You don't want to have to run anti-virus software, for example). Take a huge bag of money and reward developers for porting their software. By making them port software anyway, developers might also port their software to ARM (especially in exchange for financial benefits). Introduce the touch interface into the regular Windows as well for people to use on all-in-one PCs or laptops with touchscreens or to use as a media centre. This enables them to get used to the interface.
Then you have tablets and smartphones that work with touch and have the software Windows can run. That would at once have propelled MS to become perhaps the biggest, or at least one of the biggest, players on the mobile market.
When MS first showed win 8 I was absolutely confused. They did not port software, instead integrating the regular and the mobile OS in Windows 8. Why force desktop users to use an interface based on touch controls? I know some people like the new interface, which is great, but the fact of the matter is that it's not suitable to power users period. Why integrate two OSs that are used for completely different purposes (casual consumption of media versus work, creation, "complicated" consumption (like games) and some casual consumption)? Why make the desktop environment an app that lacks convenience? Why use two completely different interfaces in one OS?
I couldn't get my head around it. MS has massive pockets, if any company could get x86 software to work on ARM (and vice versa) MS would be it. Their main asset (seriously) is the massive amount of third party software available on Windows. Why not use this asset? Even weirder, why WASTE this asset by relegating it to a not very well functioning desktop app, which requires switching back and forward between Metro and the desktop app? Why make existing third party software (developed for a mouse and keyboard) a lot less effective by requiring users to use an OS based on touch?
For weeks, even months, I could not find a better answer than "Steve Balmer simply doesn't know what he is doing." However, while it is true Balmer doesn't understand his own damn market, he has a clear plan. It's just going to be the demise of Windows and Microsoft. MS might be able to keep going for a few years, but I predict it will have lost its dominance in the next 10 or so years.
Although Balmer now has a strategy, it is still trying to do too much. The thing is, MS doesn't WANT the desktop app to be used. They can't NOT offer support for old software, because that would mean nobody has an incentive to stay with Windows. MS keeps supporting the software but makes it annoying to use. At the same time it's stimulating third parties to port their software to the Metro interface. This means MS doesn't immediately loses its market share (people still need Windows for their software) while it makes it attractive to start using the Metro environment in favour of the desktop app.
Why?
Because by forcing desktop users to use Metro apps, there is a large market for Metro apps, which are also suitable for tablets, and MS can take a 30% cut on all apps (including the lucrative market for third-party desktop apps!).
Balmer is doing this not just to become successful on the mobile market, it also want to take the same cut on software as Apple is doing (or at least, shareholders want that).
The big mistake Balmer, as non-techie, is making, is that he confuses the rise of mobile devices with the rise of touch input.
The PC may be dying in the sense that full towers may well disappear. Sure, desktops can provide higher performance because there is more space for parts (to keep hardware cool), but even relatively slow processors (like Intel Celerons or Pentiums) are already capable of handling almost any daily task except "hardcore" gaming. Tablets (or even smartphones) may be able to handle these tasks in the future. To buy a desktop for some hardcore gaming or some complicated calculations is attractive only to a small crowd (and the cloud or mainframes might be able to do these calculations when using tablets).
HOWEVER, the PC as a combination of mouse and keyboard and a massive standalone screen is not going to disappear. Sure, tablets may handle the computations in the future, but the mouse and keyboard and immobile screen are simply far more efficient to use for work.
The problem with Win8 is that when this is going to happen it still got nothing, because it is completely focused on touch. Tablets and smartphones yet serve different purposes and thus require an OS with different capabilities (tablet OS has no use for 90% of desktop OS features) so they should use a designated OS based on these purposes (casual media consumption). Once tablets become more powerful, the desktop OS can be integrated with the tablet OS to replace computers by connecting the tablet to the screen and mouse + keyboard.
For that to be attractive, however, it is necessary that the OS offers both very good touch support and good mouse+keyboard support. Win8 only offers the former.
Win8 also doesn't have any third party software for its ARM tablet OS and much of the third party software on the x86 OS does not yet support Metro. Power users do not benefit of Win8 at all.
I think Win 8 will be a worse flop than Windows Vista. Companies aren't going to switch, and I doubt many consumers will (especially not the ones that are crucial to MS, that is: power users. Casual users may as well buy an Apple or Android tablet because they don't need the third party software in the first place). That will put MS in a hilariously shitty position. No sizeable market share because the strategy of forcing desktop users (= huge market share) to use metro (= apps for its tablets) doesn't work. Low sales of win 8 to desktop users. Missing the boat of integrating desktop and tablet OSs by already doing so (isn't it ironic?).
MS should have focused on making their software work on tablets, making their tablets popular and attractive to develop (ARM) apps for, which would make its Windows Phones attractive as well. At the same time it should be working on integrating the tablet OS with the desktop OS to enable tablets to offer the same functionality as desktops now (also by letting the cloud or mainframes do complicated calculations). Instead, they are reducing the desktop to the level of functionality of a tablet by focussing on touch.
Edit: wow, MASSIVE wall of text.
Sorry.
Also, I'm no MS hater, I like Windows 7. I do not use Linux or OSX.