Joshua Porter suggested I listen to the Identity Gang II show. I'm glad he did, great listening:
"One year ago, Kim was challenged to defend Microsoft’s intentions in the space. This time, he was talking about meetings with Mike Shaver and "other parties" (I think the careful language was) about interoperability between Microsoft’s Infocard and FireFox (on which Mike works), among other good things–all within an inclusive Identity MetaSystem, and respecting the Laws of Identity. A new open source identity system called YADIS has also emerged from Gang workshops. We talked about that, too."
It seems a lot of progress is being made (re-read the above: Mike Shaver of Firefox + Microsoft's Infocard!).
Why does this progress matter? Joshua nails it:
"Identity will become important when people realize that we should be in control of our own identity data, that signing into each site differently is not only difficult but backwards, and that we have power as buyers. Until then, we’ll probably all use two or three passwords for the 20 or 30 sites we log into, thus taxing our minds less but also lessening security benefits across the board."