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Microsoft just announced a new offering at the Professional Developers Conference in Los Angeles called Windows Azure, an online service for developing web applications. Azure, which has been hinted at during the last few months (under names including Project Red Dog, Windows Cloud and Windows Strata), marks the traditional software giant’s biggest move into the Internet cloud and into the software-as-a-service business model.

Azure ties Microsoft’s existing software development tools into a platform for deploying applications in the cloud, competing with Amazon Web Services, Google App Engine and others. Given all the discussion of whether businesses can depend on the cloud, one of Azure’s big selling points will probably be its touted reliability. Microsoft says that instead of requiring traditional “24/7 management,” Azure builds the management into the platform and the applications themselves. I’m not completely sure what that means, but the bottom line is that Microsoft says Azure can provide much greater uptime, perhaps 100 percent. Microsoft also says it will use Azure to launch its own web services.

For its first demonstration of the ease of building apps and putting them live on the web with the new platform, Microsoft created a slight twist on the “Hello World” program (traditionally the first thing a programmer builds). Instead of displaying the message “Hello World,” Microsoft gave the text a symbolic tweak: “Hello Cloud.”

Most of Microsoft’s discussion at the conference focused on business applications, and Microsoft is in a better position than anyone to convince big companies in particular to move much of their work into the cloud. (Incidentally, Corporate Vice President David Thompson said Microsoft will eventually make all of its own business applications available under the SaaS model through Microsoft Online Services.) But Azure can help fun applications grow, too — the first real application that they showed off was a mobile social discovery service called Bluehoo.

Azure is being released as a free community preview today at the azure.com website. The preview offers only a handful of the features that will be available in the final version, Microsoft said. The eventual pricing will be based on a combination of app resource consumption and a guaranteed level of service from Microsoft. It will be “competitive with the market,” said Ray Ozzie, Microsoft’s chief software architect.

Update: I just left a press information session for Azure. A lot of it was restated from the keynote, but Mark Rogers, Microsoft’s director of cloud services, helped clarify where Azure sits in the broader landscape. For one thing, Rogers confirmed that Microsoft will be targeting large, “enterprise”-size companies, rather than small businesses, but it will also try to serve the “early adopter” crowd of developers and startups.

Also, one of the big points that Microsoft keeps hammering home is what it calls “the power of choice” — with Azure, companies will be able to move their applications back-and-forth between by Microsoft’s cloud and their own on-premise servers with just some “relatively trivial” changes. For example, if you have an on-premise application, you should be able to bring some of it capabilities into the cloud without too much trouble. Unlike most of the competition, which focuses exclusively on the cloud, Microsoft is saying cloud applications and offline applications have their uses — so why not offer both?