To an extent, Microsoft's position was understandable--the Kinect was intended to drive sales of Xbox 360s and Xbox games, and a Kinect sold for some other purpose wouldn't generate additional revenue for Microsoft. Also, if the number of Kinects available for the holiday season is limited, Microsoft might not have enough to meet demand. However, the ham-handed way that Microsoft went about threatening anyone who dared write a driver for the Kinect, which at the end of the day is simply a USB 2.0 device, backfired.
Less than a week later, a Spanish developer Hector Martin wrote and released his open-source driver and won the Adafruit bounty. Since then, other developers have begun adapting the Kinect for a variety of applications, such as 3D video and contactless measurements, and as the vision system for a robot. It has great potential in education, machine vision, communications and a variety of other applications.
Yesterday, after the EFF weighed in, Microsoft apparently "saw the light." CNET reports that a Microsoft representative on NPR's Science Friday said that the Kinect was left open by "design", and a tweet from the Science Friday account stated that "(Xbox director of incubation) Alex Kipman says Kinect interface was left unprotected 'by design.' [And Microsoft's] Shannon Loftis says she's 'inspired' by community finding new uses." Adafruit Industries replied on its blog with "Congrats to everyone in the open source community, in about one week we turned 'work closely with law enforcement' to 'inspired' by community finding new uses for Kinect."