Microsoft doesn't talk to me much (not at all, really) so I haven't gotten the official pitch. But it looks like this is some sort of cross-sell for Xbox, Windows Media, Vista and any other parts of Microsoft's "digital lifestyle" vision. Apparently, UPnP AV, DLNA and the other interoperability initiatives and technologies either aren't doing the trick or aren't moving fast enough. But I know that I don't like networking products that require running Windows and this sure smells like something that does.
HP is the only company signed up right now to make a product based on Home Server and I have to wonder how they're going to get the price down to where they can compete with companies like Buffalo Technology, Infrant, etc. who don't have to pony up a license fee for Linux and have access to open source applications that provide just about any function you'd want a "home server" to do. I suppose it's more a case of staying on Microsoft's good side, which at least for now, is still is required if your company ever wants to sell products in this town again.
Not that this matters right now, since from what I could gather in a quick fly-by in HP's booth where they were showing the prototype (is sure is purty, I'll say that), you won't be seeing it in store shelves until, ahem, "summer", which means 2007 holiday season to me.