i've been watching this stuff for awhile and attempted to use it in october when it was released, but ended up killing my computer in the process. vista has winfx laying around and it didn't destroy things, so i got a bit further.
it took way too much bullshit to get their examples up and running (come on people, your quickstarts should fucking compile out of the box, hmm. sounds familar), but damn.. this is going to be very powerful. the examples are super short on code and super shiny.
so the basic concept is this..
winfx = vector graphics
xaml = winfx meets html
using a graphics (vector) program you can create some fancy ui and give it to your programmer. or... your programming can create an ui that looks like shit and give it to a designer. the programmer gives him the .xaml file, nothing else. the designer fancies it up and gives it back to the programmer. the goodstuff part here is that they can round trip back and forth as much as they want. it is not half-assed rountrip either because the code is completely separate from the xaml. OMFG what a concept.
of course none of this is new. think svg and/or xul, but microsoft with their mighty man-power and love for embrace and extend has took it (well, maybe not the first 3 versions) to a very nice and useful place.
expect digustingly flashy stuff from programs now, not just the web.
if you are brave, you can play with it yourself here..