Microsoft CEO Steve Ballmer unveiled a product this week called Surface at the Wall Street Journal's D: All Things Digital conference.

Surface is a Windows Vista "coffee table" computer that features multitouch -- the ability to respond to more than one input at a time. Surface needs no mouse or keyboard. On-screen objects move like real 3D objects and are manipulated directly by touching the screen.

If you regularly read this column, this should sound familiar -- in my February 16 piece, I discussed the coming third-generation PC user interface. In that column, I described the main characteristics of this interface: multitouch, gestures, physics, 3-D and the minimization of icons -- all elements of Surface -- and pointed out that the first such example would be the Apple iPhone. Such a user interface lets you "grab," "slide," "pinch," "rotate," "expand" and "move" on-screen virtual objects as if they were real.

I pointed out that the shift from the first generation to the second -- from command line to graphical user interface -- was 23 years ago, and that we were long overdue for the next generation. I also asked whether the desktop version of this third-generation UI would come from Apple or Microsoft. The answer, I suggested, was both.

When I wrote that, I assumed Apple would be first to announce a third-generation computer. This week, Microsoft beat Apple with an announcement. But will Apple beat Microsoft with shipping an actual product?

What is Surface, anyway?

Microsoft plans to sell Surface devices starting later this year to hotels, stores, restaurants and public entertainment venues as a kind of gimmicky marketing, gaming and informational kiosk.

Surface performs some neat tricks. Five cameras watch from below for what happens on the system's screen. Software processes the live video and recognizes objects and hand movements in real time. Unlike, say, Tablet PCs, Surface doesn't have an actual touch screen. All input is based on what the cameras see.

While iPhone's multitouch is optimized for two touches, such as expanding a photo by moving two fingers away from each other, Surface has been optimized for up to 52 touches. That means five people can use all their fingers and Surface will register all the movements. Multitouch Texas Hold 'Em anyone?

Surface can recognize objects you place on the screen if those objects have a three-quarter-inch square bar code-like identification tags called dominos affixed to them. Any object placed on the screen will immediately be surrounded by an on-screen glow.

T-Mobile plans to use this object-identification feature in its stores. Customers will be able to place cell phones on the Surface screen and information on the phones will pop up.

What is Surface Computing?

Microsoft Research and the company's hardware division have reportedly been working on Surface for about six years. During that time, they built some 85 prototypes.

The Surface product is cool enough, but what's really important is the broader Surface Computing initiative and platform. Surface is no novelty, fad or vertical-only technology. It's the near future of mainstream PCs, and it's going to be in your home within five years. Ballmer said Microsoft intends for Surface technology to become ubiquitous in homes "from tabletops and counters to the hallway mirror," and I believe him.

With this technology, you'll be able to wirelessly sync your phone, Zune or camera with the Surface computer by simply placing the gadget on the screen. Placing a Wi-Fi camera on the screen starts an auto-sync, and the photos inside the camera "spill out" onto the screen.

Look for super-expensive consumer Surface Computing PCs late next year. However, as with most things in technology, prices will decrease, so look for cheap Surface PCs in three to five years.

Why Surface Computing matters

Three things are surprising about Ballmer's announcement. First, Microsoft was able to keep the project a secret. Second, the first product will ship as early as this year. Third, Microsoft adds to the existing research on third-generation user interfaces the concept of recognizing objects.

Pundits, the press and users -- including me -- have been hard on Microsoft lately. And for good reason. Flaccid Vista sales and confusing Vista versions, high prices, lame initiatives like the Ultra Mobile PC and a general lack of innovation have given the company an increasingly bad reputation.

But Surface is a spectacular home run. The secrecy, the implementation, the rollout plan, the early marketing all impress.

Surface appears to give Microsoft an early lead in the next generation computing platform, and, significantly, it thrills partners like Intel and others. Surface craves massive computing power. It guarantees another decade -- or two -- of global demand for ever-newer, bleeding-edge hardware. And even though Microsoft will build the initial hardware itself (using partner components, of course), it's likely that the company will extend the platform to PC makers like Dell and HP.

Will Apple be first to ship?

For two decades, Microsoft critics and Apple fans have bashed Microsoft for copying Apple's user interface innovations. First with the graphical user interface concept itself, then with Windows 95 and, most recently, Vista. Never mind that everyone, including Apple, copied Xerox.

Surface kills such bashing -- no one will be able to say Microsoft followed or copied Apple.

However, they will be able to say that iPhone was technically the world's first third-generation device. The similarity between Surface and iPhone was made obvious in the official Microsoft press release, which said: "Imagine quickly browsing through music and dragging favorite songs onto a personal playlist by moving a finger across the screen."

Uh, no need to imagine that. It was clearly displayed in Steve Jobs' Macworld keynote in January. But the iPhone's limited processing power allows it only a tiny fraction of the real power of full-size, third-generation computers.

Call me irresponsible, but I think there's a chance that Apple will announce something similar to Surface next week, and possibly even beat Microsoft to market with it.

Apple CEO Steve Jobs will deliver a keynote address at the company's Worldwide Developers Conference on June 11. He is expected to show a feature-complete version of the Mac OS X Leopard. Given Jobs' habit of rolling out surprises at such events, it's reasonable to speculate that he might unveil a third-generation interface product -- a Surface competitor -- that runs on Leopard and an Intel-based hardware platform to go with it.

A shock third-generation desktop UI announcement from Jobs June 11 would provide another reason for Apple's recently announced delay for Leopard. In any case, Microsoft's Surface ships in November while Leopard is expected in October. If Leopard comes with a surprise third-generation user interface option, it would beat Microsoft to market. If such a product is for consumers, we'll see Jobs on the cover of Time again.

If, on the other hand, Apple and Jobs have nothing in the third-generation space up their collective sleeve, we're looking at a whole new ball game. The perception and the reality will be that Microsoft, not Apple, is the leader and innovator in the next-generation desktop user interface department.

Mike Elgan is a technology writer and former editor of Windows Magazine. He can be reached at mike.elgan@elgan.com or his blog: http://therawfeed.com/.