Microsoft's working on an anti-spyware solution codenamed "Atlanta". You can view the screenshots at Neowin's site (just avoid the orange links, as those are advertisements. Go for the blue links).

As far as features go, it looks pretty standard. There's the basic "scan my computer" function, an automatic nightly full system scan, as well as some sort of real time scan. I'd assume that it sits in your system tray, and scans every program you run, file you open, registry entries you modify, and cookies you download. It also downloads updates daily, like the way the SP2 auto-updater does. In fact, I wouldn't be surprised if this app appears as another module in the SP2 security center (including a big red dangerous looking icon with the text "Requires attention!" before the first time you run a full system scan).

Like many other anti spyware apps, when it does detect something fishy, it gives you a description of what it found, and what you might want to do about it. While the screenshots make for decent eye candy, what really matters is how effective the scanner is. Surely when Microsoft finishes and releases Atlanta for free, various tech sites will grab it and run some tests on it, comparing it with AdAware and SpyBot Search and Destroy, amongst other programs.

If it's of comparable quality to these other two competitors, I'll probably switch over to Atlanta. I don't think my current tool (SpyBot) does automatic updates, nightly scans, or real time checks.