The "look" of the Windows user interface has gone through fashion cycles.
In the beginning, there was Windows 1.0, which looked very flat because screen resolutions were rather low in those days and color depth was practically nonexistent. If you had 16 colors, you were doing pretty good. You couldn't afford to spend very many pixels on fluff like borders, and shadows were out of the question due to lack of color depth.
The "flat look" continued in Windows 2.0, but Windows 3.0 added a hint of 3D (notice the beveling in the minimize/maximize buttons and in the toolbar buttons on the help window).
Other people decided that the 3D look was the hot new thing, and libraries sprung up to add 3D shadow and outlining effects to nearly everything. The library CTL3D.DLL started out as just an Excel thing, but it grew in popularity until it became the "standard" way to make your dialog boxes "even more 3D".
Come Windows 95, even more of the system had a 3D look. Notice the beveling along the inside edge of the panes in the Explorer window. Furthermore, 3D-ness was turned on by default for all programs that marked themselves as "4.0"; i.e., programs that were designed for Windows 95. For programs that wanted to run on older versions of Windows as well, a new dialog style DS_3DLOOK was added, so that they could indicate that they wanted 3D-ization if available.
And if the 3D provided by Windows 95 by default wasn't enough, you could use CTL3D32.DLL to make your controls even more 3D. By this point, things started getting really ugly. Buttons on dialog boxes had so many heavy black outlines that it started to look like a really bad mascara job.
Fortunately, like many fashions that get out of hand, people realized that too much 3D is not a good thing. User interfaces got flatter. Instead of using 3D effects and bold outlines to separate items, subtler dividers were used. Divider lines became more subdued and sometimes disappeared entirely.
Microsoft Office and Microsoft Money were two programs that embraced the "less is more" approach. In this screenshot from Microsoft Money, observe that the beveling is gone. There are no 3D effects. Buttons are flat and unobtrusive. The task pane separates itself from the content pane by a simple gray line and a change in background shade. Even the toolbar has gone flat. Office 2000 also went largely flat, though some 3D effects linger, in the grooves and in the scrollbars (not visible in picture).
Windows XP jumped on the "flat is good" bandwagon and even got rid of the separator line between the tasks pane and the contents pane. The division is merely implied by the change in color. "Separation through juxtaposition."
Office XP and Outlook 2003 continue the trend and flatten nearly everything aside from the scrollbar elements. Blocks of color are used to separate elements onscreen, sometimes with the help of simple outlines.
So now the pendulum of fashion has swung away from 3D back towards flatness. Who knows how long this school of visual expression will hold the upper hand. Will 3D return with a vengeance when people tire of the starkness of the flat look?