I have had to hold my tongue for a while on this one... The first glimpse was given at SeeWindowsVista and it left a lot of people thirsty for more. Check this out: British Library: Turning the Pages and to learn more about the project go here. Now, be aware, this application makes heavy use of graphics processing and has some stringent requirements (e.g. Windows Vista, Aero-capable graphics).
I find this significant in many ways. First of all, this is an XBAP - XAML Browser Application - which is essentially a Windows Presentation Foundation smart client delivered through the web browser. Now this is different from WPF/e in that the .NET 3.0 Framework is required to use XBAPs, while WPF/e (being a subset of WPF) is targeted for multiple browsers and platforms without the .NET 3.0 installation prerequisite. XBAPs are significant in that they offer the best of smart clients with the ease of deployment that web applications provide. Yes, you need .NET 3.0 which means you have to be using Windows XP or Windows Vista and that is the drawback that pure web apps benefit from not having. XBAPs are delivered to the client through the ClickOnce technology introduced in the .NET Framework 2.0. So why is this significant from a technology perspective? It's another, very rich option for creating applications and deploying them to your Windows customers that strike a reasonable balance between smart clients and web clients.
Another aspect I find the British Library project significant is the domain in which it exists... There is a wealth of knowledge out there in the form of written materials (e.g. books, manuscripts, diaries, etc.). Google and Microsoft are undertaking huge efforts to digitize libraries and make them available on the web for all to benefit from. To me this is a great and exciting endeavor. However, personally I have a hard time reading books on the computer screen and many that I have spoken with feel the same; some people don't have a problem with it. Now take the efforts of digitizing books and couple that with a rich application like Turning the Pages 2.0 (British Library app). Now, let's consider adding some Web 2.0-like experiences to it... Online storage capabilities for creating your own research notes, annotation capabilities, tagging, and collaboration tools. For me, the richness that the platform provides is unlimited in terms of really delivering an enhanced User Experience that could literally change the way we publish, read, research, and enjoy books.