A lot of commenters here seem to argue that Microsoft still has the vast majority of desktop installations, and that this isn't likely to go away soon. I agree (I don't like it, but I think it's true). But I also agree that Microsoft isn't a threat any more, like it used to be. And, on reflection, I agree that it is web apps that are making the difference.
I don't think that Word or Photoshop moving online is what really makes the difference, though. Every hoary Windows competitor has had a word processor and an image editor. (Sure, they didn't match Word feature-for-feature; does Writely?) But I believe a major reason that prevented people from switching has been the long tail of applications: "It doesn't have any accounting software for plumbers!"
The feeling that Microsoft had a secure monopoly came from the fact that these long-tail programs were all written for Windows, because that was what was economic for its developers. Word and Photoshop always had a Mac version. Accounting for Plumbers never did.
Now, these applications live on the Web. And while the people using them still might use Windows, it doesn't matter; it makes Microsoft money, but it doesn't buy them any leverage.