The Windows Blue name was first unveiled by ZDnet earlier this year, but with little other information to go on. The Verge has more, and it's all pretty interesting, but at the same time, not at all surprising either. The unification of the Windows platform across PC, tablet, and phone continues, and the monolithic Windows releases every 3-5 years will become a thing of the past.
In order to more efficiently compete with iOS and Android, Microsoft wants to move Windows to a yearly update program. This will be a big part of Windows Blue, and in my view, a very welcome and necessary one. The pace of development on especially Android is ridiculous, and monolithic large-scale releases aren't going to cut it anymore. As part of this, Windows Blue will be very cheap or even free.
Where it gets weird is how The Verge describes the application situation. "Once Windows Blue is released, the Windows SDK will be updated to support the new release and Microsoft will stop accepting apps that are built specifically for Windows 8, pushing developers to create apps for Blue," The Verge details, "Windows 8 apps will continue to run on Blue despite the planned SDK changes."
I'm assuming all this means that Windows Blue will simply be free for Windows 8 users, because otherwise a lot of Windows 8 users who won't upgrade won't be getting any new applications. This would make Windows 8 end-of-life quite quickly, as the supposed release date here is mid-2013.
Microsoft needs this. Apple nailed the update situation with iOS, while Android is a total and utter mess. If Microsoft can simultaneously update all the devices Windows 8 runs on in one go, once a year, irrespective of country of carrier, they've got a major thing going on. Changes would be propagated across all device types - a major boon for developers.