The Browser Wars wage on and on, with the stakes rising ever higher. (If you don't believe us, take a gander at Don Crabb's Doomsday Scenarios over at MacCentral, which include the collapse of the international software market and the U.S. slipping from the top of the technological ladder.) But today marked two big events in the chronicles of the battle. The first was Microsoft's out-of-court settlement with the Department of Justice regarding the interpretation of Judge Jackson's preliminary injunction, as reported by Bloomberg News.

In today's scheduled episode of "Redmond Justice," Microsoft and the DoJ were supposed to square off in closing arguments over whether or not the software company should be found in contempt of court for violating last month's temporary injunction, which ordered Microsoft to ship Windows 95 without Internet Explorer until the issue had been further researched and a final verdict could be made. In a surprise plot twist, however, today we saw Microsoft settle out of court with the DoJ and agree to ship a current version of Windows with the browser disabled. Whether or not any other penalties were invoked is unclear, but it would appear that Microsoft managed to squeeze in an extra five weeks of forced bundling while avoiding the $1 million-a-day fine for contempt. (No one ever said they weren't savvy businessfolk.)

What does this mean to the overall case? Justice thinks the settlement is significant because it can be construed as Microsoft's acknowledgement that the operating system and the browser are separable, and therefore separate. The crux of Microsoft's argument has been that IE is just another feature of Windows 95, and not a separate application; this settlement could hurt that defense. But in the end, what else would Microsoft have done? It was plainly obvious that the judge was going to side with the DoJ on this issue, so finally agreeing to comply seems to have saved them some $35 million. It's all about smart money...