In his SQL Server 2005 Update letter, Paul Flessner announced a new addition to the SQL Server family. SQL Server Everywhere Edition is a light weight version of SQL Server that you can embed inside of your applications. It will have the ability to synchronize data with other editions of SQL Server.
A key scenario for this edition will be to enable local data management for applications which need to work in an occasionally connected environment. This is a scenario that we see quite frequently in the US Federal government.
The first CTP of SQL Server Everywhere Edition should be available this summer. The final release should occur by the end of the calendar year.