Well, Microsoft is in a position that it hasn't been in since 1981. The digital media field is still virgin territory, with a few players like TiVo, the cable companies, and Microsoft jockeying for position. They don't have the privileges that a monopoly affords them in this new market.
Apple has shown a pretty good view of what customers want with regard to digital music. Are there more fully-featured MP3 players out there? Absolutely. Are they getting as much attention as an iPod? No. Why? Because the end-all be-all aspect of the iPod design was simplicity. By putting the ENTIRE digital music experience in Apple's hands, they created a model of ease of use. And now they enjoy a "Microsoftian" share of that market.
It'll be interesting to see how Apple gets into the digital video pie. The Mac Mini makes a perfect "Media PC". Tiger will have H.264 codec support in Quicktime 7.