1. Uncapped indemnification: this one is pretty simple. If you're sued for using some tech that powers Azure, Microsoft will cover any losses (indemnify you).
2. Patent pick: if you're sued for patent infringement _at all_, Microsoft will let you "pick" one out of a selection of 10,000 available patents to use in a countersuit. This is an extremely common tactic in IP lawsuits, but one that is only available to folks with large patent portfolios (this is what people mean when they say they have a "defensive patent strategy"). For example, Oracle sues Google for infringing patent X, Google countersues for infringing patent Y, eventually everyone settles (or not, heh). Presumably, the patent will actually be transferred to you (you become the legal owner of the patent) for the duration of the suit (I'm sure there are lots of conditions here).
3. Springing license: "non-practicing entities" (NPEs) are a _huge_ problem for tech companies. They're also known as "patent trolls." The reason they're so hard to deal with is that they don't actually do anything (other than sue people) so it's hard to use the countersuit tactic mentioned above (if you don't do anything, you're probably not violating any patents). Microsoft is saying that, while they do not generally transfer patents to NPEs, if they ever did so there will be a "springing license" to that patent granted to eligible customers. Therefore, those customers could not be sued by the NPE.
Now, some editorial. I actually think this is a good thing. They're trying to create a "patent free zone." They can't get rid of patents, so the only way to do that is with "legal hacks" like this. Right now small companies without patent portfolios are at a huge disadvantage when it comes to defending against frivolous patent suits. This would absolutely help. Moreover, one of the eligibility requirements states that you must have remained "patent peaceful" against Azure workloads for the past two years. The only way they could have made this better is if they had made the program more broadly available (btw, you're only eligible if you spend > $1,000/mo on Azure).
For what it's worth, the ideas here are not completely novel. Patent exchanges are fairly common (although you usually need a patent portfolio to join one). There are also some similarities with the Apache 2.0 "mutually assured destruction" clause which (again, in ELI5 terms) tries to prevent patent suits for use of Apache licensed software by saying that if you sue someone for using Apache licensed software then other people can sue you for your use of Apache licensed software (without giving up their right to not be sued).