This is interesting: Microsoft's developing some sort of new mobile OS, according to Mary Jo Foley, who's apparently spent months digging for details of a project code-named "Menlo."

A just-published Microsoft research paper describes Menlo as "a prototype mobile device with a capacitive touch screen (4.1 [inch] diagonal, 800 x 480) running Microsoft Windows Embedded CE 6.0 R2 which incorporates a Bosch BMA150 3-axis accelerometer and Bosch BMP085 digital pressure sensor (barometer)."

Foley's Aug. 8 blog post includes an image, taken from the paper, of a smartphone-like device. Additionally, a number of the project's researchers seem focused on sensors, particularly within a geo-location context (an application layered atop Menlo, "Greenfield," apparently enables users to retrace their path). Even with that information, though, it's hard to glean the project's ultimate aim: Microsoft already has Windows Phone 7 prepped for the mobile arena, and it's unlikely the company will pursue another homegrown phone project after taking a multimillion-dollar bath on the whole Kin debacle.

As Foley hints, this might have something to do with Microsoft and ARM's recent architecture licensing agreement, which could see Microsoft leverage ARM's technology offerings to tablets or smartphones. Or maybe Microsoft's just pursuing yet another research avenue, with no definitive goal in mind. If it's the former, we'll probably find out relatively soon--Microsoft is prepping for a major play (some would say "make or break") in the smartphone and tablet arena over the next several quarters.