I've said in the past that I haven't alot of faith in today's browsers going forward as I think they have outlived their need and what I'd dare say is we need to realistically think about what can be done better in this space. It won't happen over night and it make take years to wind down from the browsers we see today, to the next "agent" we use for the web - but - I have a theory that it will happen eventually.
It's not a popular theory and a lot of people think it's a looney one, but I stand by it as I think software has radically changed in the last 5 years. We are seeing more and more applications becoming context specific in their approach, solving very small problems pieces at a time and doing so is becoming more and more relevant to our day to day lives (i.e why does concepts like SOA or SaaS exist?).
An example would be Flickr, although its currently adopted a browser focused approach to its distribution, it however needs to evolve and grow further in its empowerment to its consumer(s) overall. Yet, I'd wager they (Flickr) are smart enough to know that to move forward in this manner will require less bleeding edge technology but a reliance on popular "agents" in opening their reach/growth pontential.
That being said, say Adobe Apollo or Windows Foundation Everywhere (WPF/e) gain massive amounts of popularity in the next 1-2 years, this could open up more possibilities for companies like Flickr as they could do more things with the content and provide a richer user experience then what the current web browser today an offer.
Yet, they have shifted gear - in that one could argue they are keeping fingers in both barrels if this scenario above were to play out (it's a reasonable scenario at that). Again, what role is the browser playing it today's application and how much usage of the browser is being used. If I were to integrate Flickr with say Windows Media Centre, is this not serving the same purpose but providing more depth in terms of reach - yet where is the browser going in this space?
An important thing to note is why has technologies like Flash grown in widespread adoption and use and more and more interactive content is showing up in it.
The browser plays no role in this equation, as Flash Player typically is doing the bulk of the work and it can be housed in any type of browser overall.
There is the AJAX perspective, in that it's growing with popularity and concepts like WPF/e are playing a role in this space by complimenting these skills going forward. I can see more potential around the browser still in this light - yet - I can't but help think that the bulk of the "goodness" is being shifted towards WPF/e's runtime and less about what the browser itself - standalone can do.
I'm not being popular when I say "The browser has a terminal illness and is dying." as it depends on what you define a browser as and more importantly the path forward in making it still relevant especially when you start to see more and more large companies shift gears and try out new pieces.
We've seen this already today, with companies like eBay adopting Apollo as a point of difference. SAP have done the same with Project Muse (Apollo), ORACLE are rumored to be shopping around for its next "UX" approach to things. A lot of companies are looking deeper into Windows Presentation Foundation (WPF) and WPF/e because they can see the roadmap forward in this space.
A great perspective on the matter can be found at this site (Will browsers ever deliver applications instead of documents? )
It's not about XHTML and complying with standards its more about points of difference - how can I do the same thing my competitor is doing in a web driven world, but better.
I say this as I think that's probably the one piece that the XHTML argument gets ignored by and I'm all for standards, I embrace them whenever I can but at the same time they have to be relevant, they have to appeal to the points of difference argument and if they can't, then they will pushed aside.
It's a radical theory per say and I can appreciate others are against it with every fibre of their body which I'd probably say to them this. If you could re-create Firefox/Internet Explorer for example what would you do differently.