The politics of this mess get really confusing. I think the real story is Microsoft had been shipping a version of Java, making it possible to run Java
applets from IE without downloading more stuff. The version they shipped, however, was always hopelessly out of date, so it was better to download a newer version from Sun and use it as a browser plugin, or stand-alone, depending what you were doing. Microsoft got a lot of mileage by declaring they would "withdraw support" for Java, leading one manager of my company, an MS evangelist, to crow about the death of Java. However, this withdrawl of support really just means MS will not ship the obsolete version of Java like they used to. Java still works on Windows, and will still work as a plugin to IE. To make matters more confusing, MS was court-ordered to keep including Java for the time-being, meaning all but a few early-release copies of XP actually still have MS Java support, such as it is.