The lights have gone down. They're flashing ads for upcoming keynotes, and playing maybe the worst music ever recorded in the history of the world. Bill has yet to emerge from the smoke.

CEA president Gary Shapiro: Happy New Year and welcome to CES. In my opinion, these are the best four days of the year. Four days packed full of opportunity. I urge you to make the most of it. [Lists keynote speakers.]

[Introducing Bill] They wanted to put a computer on every desk, in every home. Microsoft has created many new technologies that changed the marketplace: Xbox, Vista, et al. Microsoft has created the tools to help people connect, wherever they are.

He is also a philanthropist. With over 500 employees, the assets of the organization [are] over $36 million.

I am proud to introduce the founder and chairman of Microsoft, Bill Gates. [Playing "Do You Believe in Magic," by the Lovin' Spoonful.]

Announcer: Ladies and gentleman, please welcome the chairman of Microsoft, Bill Gates.

Gates: Good evening, it's great to be here and see all of the exciting things going on. My first keynote was in 1994, when the Internet was first getting started and we entered the digital decade. Broadband on PC took off.

The trend here is clear. All media entertainment will be software-driven. The first digital decade has been incredibly successful. Taking the full screen PC, and making it better and better and customizing things so that people will get exactly what they want. I talked before about the auto PC, and the handheld PC. They're huge parts of the market today. The idea of the TV meeting the Internet. We've really kicked that off in a big way.

We've made a lot of progress. The first digital decade has been a great success, and thousands of companies here have worked together. This is just the beginning. There's nothing holding us back from going much further.

This is my last ketynote. And in the beginning of July, I won't be a full-time employee for Microsoft. I will be working for the foundation. I had some friends prepare me for not working for MS full-time, for the first time since I was fifteen.

[Shows comedic video with Ballmer, Jay-Z, Matthew McConaughey, Bono, Spielberg, George Clooney, Jon Stewart, Hillary Clinton, Barack Obama, Al Gore, Brian Williams, showing Bill's new careers as a musician, actor, "Daily Show" co-host, vice president, etc. None are too excited about these proposed career changes.]

Bill: I don't think it was an accurate portrayal of what will happen, but it was a lot of fun to make. The transition is going smoothly. I will still have some software-related projects.

The second digital decade will be more focused on connecting people. The apps will work not only on the PC, they will work on the Internet, on phones, on TVs. These services will span work and business. The PC has always spanned that boundary. They will used cloud-based approaches.

The three key elements are high-def experiences, everywhere. Projectors, better displays, the meeting room table for collaborating. It will just be there and be easy to manipulate. The quality of the rendering will be very, very rich. 3D environments will work for many of the Web experiences. It will apply high-quality audio and video in a very rich way.

Second, everything will be very connected. No longer will users have to bridge between to devices. Things will be simple, and information can be shared across users. When you just pick up a device, you can authenticate yourself and it will access your information. Devices will know your location.

The third element is the power of a natural user interface. In the past year, we've seen the importance of natural user interaction, the iPhone, the Surface, the Ford Sync. Visual recognition, touch, all of these things come together to get things done. We're just in the beginning of this. This is something that software developers will build into the platform. Home automation is finally simple enough that we can bring it together with a natural user interface.

A key building block is the Windows platform. We'll build on that and use it to expand. This has been a tremendous year for the PC. We have over 100 million people using Vista now. That's a key number. We have great partners building form factors, building new ways that people use PCs.

Windows Mobile has over ten million new users in the last year, and we'll double that next year.

I want to give you a quick glimpse of some of the things that excite us about Windows Mobile and Visa.

Mika Kramer: My lifeline is Windows. Vista, Live, and Mobile connect my life in a way that's familiar. With my single Windows live ID, all of services are connected.

Tonight I want to share with you what's new.

The new Windows Live calendar lets me overlay my mom and husband's calendar. [Showing Windows Live Events, Windows Live Photo Gallery, Windows Mobile. Doesn't appear to be anything we've never seen before]

What's familiar is now integrated and connected.

Bill: I got invited to this snowboard thing, and I went to the snowboard store and they had a Microsoft Surface, which helps me customize the board. The Surface is of course a table running Windows, with some camera drivers. [Bill is creating his snowboard on the Surface.] Before I buy it, I'd like to show it to my friends, so I put it on my Windows Mobile Phone. And now it's on Surface, so I can customize it later. We see Surface showing up in lots of situation.

Another big announcement was the introduction of Silverlight. We see it as the runtime that will let people do new media experiences. I'm pleased to announce today that we have a perfect partner to showcase Silverlight. NBC has chosen Silverlight to show all 26 hundred hours of the Olympics. It's going to let us illustrate why TV is going to be very different. Let's go ahead an hear from NBC on the unique things that we are going to do together [Video begins.]

Robbie Bach: Last year I talked to you about connected entertainment. Vista is a great operating system and is such a great gaming system. The Xbox 360 has been a tremendous success, as well.

I'm excited to announce that Disney and ABC are partnering with Xbox Live. In addition, we're adding in the movie space. MGM is partnering with us. When we're done, Xbox will offer twice as many hi-def products as any cable systems.

Tonight we're announcing that Samsung and HP will be announcing new extenders connecting to TVs.We have some key announcements in the media space. DVR anywhere ability to record on media room system. With CC, we're doing an application around the election. The final announcement around the media room. We talked about the Xbox 360 being a set-top box. British Telecom is partnering with us. Building great connected media experiences is not a hobby. The new versions of Zune that come out have been doing very well. We're becoming the lead alternative to the iPod. [Showing off Zune Social with cheesy plug of popular indie bands. Super-hip!]

Talking about Ford Sync. In the United States, Ford expects to ship at least one million Ford Syncs. [Sync on stage now]

We all know that phones outsell PCs by about four to one, and at the rate of expansion, Windows Mobile is going to be very important. We're on pace to sell 20 million units. Our Tellme service is the leader in voice activation. In the future, we're going to introduce Say and See. [Demoing service. Looking for movies, using voice search. Uses GPS to locate theater. Buying two tickets to Sweeney Todd, sending a ticket to another phone. Watching Cloverfield trailer.]

The exciting thing about that scenario is it's a way that advertising companies can use the media as entertainment. Microsoft is taking a very serious approach to the advertising space. The mobile advertising space in 2008 alone is going to be $11 million, and we're the company to bring it on.

We're taking advantage of new opportunities in mobile. It's clear that software and services are going to be the key, and Microsoft is here to deliver. [Brings Bill back on to show off "the future"].

Bill: As the software advances, even advanced things will be on the mobile platform. [Showing off "advanced device from the labs." Taking a visual tour of Vegas with calendar reminders.] The great thing about this type of device is its ability to access all of your history, movies, pictures, etc.

[Pulling out Guitar Hero 3. Bill is playing last year's Guitar Hero 3 champion. Slash from G&R comes out. Plays an actual guitar. Slash is the winner of the GH3 competition. And that ends the Gates keynote.]