Microsoft thinks they're the king of the hill with Windows but it wouldn't take long for vendors to team up together and make Chrome OS, Android, or some other Linux variant into a viable alternative.
All this alternate OS would have to do is everything that Windows XP does. The number of Windows 7 specific applications is shockingly low.
Also, the argument is predicated on the assumption that this is a zero sum game. Microsoft's value proposition isn't suddenly going to be so amazing that no consumer will purchase a non-Microsoft PC. In the same way, I find it highly likely that if Apple's OS were available for licensing, a lot of PC manufacturers would license it without regard for the fact that Apple's hardware is probably superior.
It's not even clear what Microsoft's value proposition is in this new space.
If you look at applications on the iPad and Android, only a small portion of them are what you might term conventional by desktop standards.