It looks like developers are creating fewer desktop applications and instead investing in web applications and web services. Just for the sake of argument, let's say Microsoft lost control of the PC software industry and the market could freely determine whether people wanted a desktop or browser interface to their PC's operating system. With the browser interface the PC would boot up and launch the only application on the device, a simple browser like Firefox. The home page would connect to a locally running portal server that aggregates local content and services with remote resources seamlessly...my.yahoo on steroids.
Good question. But you don't have to assume that Microsoft is out of the picture: their .NET initiative was aimed, in part, at exactly this model.
First of all, a browser is a fairly good display device, so making it the display item of choice is OK. I say "fairly" good because it has many limitations. There are other possibilities.
It makes sense that we store all our data and applications on some server that can be reached from anywhere. This would enable all the various computers the home, at work, and on the road to work on the same material, continuing from wherever the work stopped previously. Moreover, any computer could be used: a friend's, the hotel's or the airline's.
There are problems. One is that of keeping the work cohesive if several computers are accessing and editing the same material at the same time -- a standard problem with databases. Another is security and privacy -- a standard problem when private information is available over the internet.
But the real disability is response time. Internet response time is slow. This is not a bandwidth issue, although high bandwidth helps. No, this is a remote access issue. The only time we get adequate response time is when the application and data are local. That being said, there are ways of working this, of quickly downloading the relevant code and data. Macromedia's Flash and Flex use this solution. This is how applets, flash, and other systems work. (Compare Google Maps with Yahoo Maps. Google puts all the data onto your computer, and the response time is faster and smoother than Yahoo. (Of course, Yahoo will soon catch up, so this statement will soon be out of date -- I hope.)
The word "browser" is problematical. The full browser, with all its bells and whistles, menubars and options is far too crowded, messy, distracting, and complex. True for Firefox as much as any other brand. But if one just opens a browser window, devoid of all that other crap, then it is a fine way to proceed.
But take the spirit of your question: This is how I expect all systems to work in the future. Our information lives will be better served when we are free to get to our information from wherever we are, with any device available.
However, perhaps some day we can move away from the tyranny of operating systems and applications. I'm developing an essay on this topic now, inspired by the work of Jef Raskin. It will be posted "Real Soon Now."