Awhile back, project 'Menlo' was talked about as a new research area for Microsoft. What it exactly entailed was not so clear and today, well, it's only a little more so...
Evidently a new paper (.pdf warning) was published by Microsoft where they say:
Menlo is a prototype mobile device with a capacitive touch screen (4.1? diagonal, 800×480) running Microsoft Windows Embedded CE 6.0 R2 which incorporates a Bosch BMA150 3-axis accelerometer and Bosch BMP085 digital pressure sensor (barometer).
That device is pictured above. On top of that hardware is a new program called "Greenfield" which is "a sensor-centric program allowing users to retrace their footsteps when seeking to find their cars."
Basically all of this comes down to Microsoft exploring the future of mobile computing and computing in general (e.g. Singularity). Like we've mentioned before, this is cool stuff to learn about and if you can remember it 2-4 years from now, you'll probably see some of the results from this work. But don't look for much of this anytime soon.
ZDNet has more detailed info for those interested.