This is what Adobe is moving toward with the Creative Suite as well.

An internet connection isn't necessary beyond the activation and occasional ping of the license server. For 99% of users, this isn't a problem. While there are some specific cases where this simply isn't going to work, I think most users will have no issues. This of course is presuming that MS will use the same methods Adobe does, which is no guarantee (they have a way of doing things that put a burden on the user).

I suspect that this is how the majority of apps will be sold within six or seven years (maybe sooner). Companies are pressured to continue to lower prices in a race to the bottom. You simply can't put out a quality product like that. This is the same reason most cheap PC hardware is, well... cheap (and crap!).

Eventually, I would guess that the majority of software will live in the cloud completely—nothing gets installed on your computer other than perhaps some sort of wrapper that puts an interface on the data feed to your computer. When you think about it, other than audio/video and specialized apps like Adobe makes, most software is small enough that it could be done this way right now.
The Graphic Mac - Tips, reviews & more on all things OSX & graphic design.