That's free as in beer and not free as in freedom...
They really have gotten a lot better on the security front. Not all the malware that gets into people's systems is as a result of security holes in Windows being exploited. A lot of them are now targeting third party software like Flash, Adobe Reader etc because Microsoft have made gains in their security procedures. Then there will always be the people who will install the latest "codec" to view a video on the web and get infected. If a user chooses to run a program as admin/root there is nothing much you can do...
I think that this is a really positive move on their part. I will still use Norton Internet Security 2010 for its speed and high detection rate but for the average user who doesn't want to shell out a few hundreds bucks a year for security software it is great!