In his post entitled Google News and RSS Dave Winer writes

It's the same reason I'm not giddy withdelight that Microsoft decided to call their support of RSS "web feeds"

Considering that the support for XML syndication technologies in IE 7 includes both flavors of RSS (1.0 & 0.91/2.0) and Atom, I personally don't think it is a good idea to call the feature 'RSS'.

Then there's the fact that RSS does sound a bit geeky, after all most people call them web pages and web sites not HTML documents and domains.

Internet Explorer is used by hundreds of millions of regular folks not just geeks. The IE team is simply trying to make the feature approachable to end users.