Microsoft's rise to world dominance lies in the monumental failure of the "network as a computer" concept. Simply, instead of moving much of the intelligence on to the client (for e.g., desktops that run on a Windows OS), the alternative of keeping much of the intelligence on servers and using less intelligent clients could have been one model. The network model could not really take off as the Internet did not have the necessary heavy plumbing to transfer all that data across the network. However, the dot.com bust left us with millions of miles of dark cable that is being leased by firms willing to provide services. Thus, the resurgence of the web based OS.
For whatever it is worth we have desktops that are more intelligent than the computer that managed man's landing on the moon. We love them, live with them and it will be tough to convince us all to move back to an alternative model where the real intelligence is in the network.
Is the network as a computer model better or worse? Well, there seems to be a resurgence in web based OSs at the Web 2.0 conference and I checked out Sparc - a "webtop". I found the interface cool and very engaging. My alma mater Pramati also has a variant that it calls "Dekoh". Other competing OSs include YouOs, Xcerion, Zcubes, and G.ho.st. I have an account at Sparc - will write more about it here.