It seems news of an upcoming Windows Live service got leaked before it was intended to be announced. From the blog post entitled Here we are - Windows Live QnA! we get

A little background…
Once upon a time, there was an intern at Microsoft who had an idea for getting people answers to the questions they needed. He nicknamed it the “hyperengine” and everyone in Web Search used it for internal projects; it was way cool. Then, when he went back to college, the internal discussions started. Shouldn’t we be building a real one?

Grassroots momentum continued and eventually Windows Live QnA was born. We hired the intern back (yes,he graduated) and got another college hire to be core developers of this new idea  -- creating a question-answer engine driven by the people.

Why do it?
Windows Live QnA gives us an opportunity to showcase unique knowledge – provided, filtered, rated and approved by human beings – not available anywhere else.  QnA allows people to ask questions of their knowledgeable friends, family, classmates at school, professional and community peers in a way that others around the world can benefit from the answers.  We want to build the biggest, friendliest and most helpful community of smart humans the world has ever seen.  Some people will love the fame and recognition that answering questions will bring them; others will appreciate getting answers quickly and easily.
....
Topics will range from business, health, arts, sports, technology and more.
• Does ivy kill trees?
•  What's a good, inexpensive moving company in Seattle?
• Any great ideas on getting motivated to exercise?
• What’s the best chocolate chip cookie recipe?
• Can I hook up an Xbox to a PC monitor instead of a TV?
....
 Key features include: 
•       In a one-to-many system, consumers may pose questions to the Windows Live QnA community, thereby creating a store of human knowledge containing facts, opinions and experiences on topics ranging from business, health, arts, sports, technology and more.
•       People then can rate answers and reputation-based scoring is available so you and others know which sources are most reputable.
•       Questions are tagged so others can easily find similar or related questions and answers to learn from
•       The ability to mark and remove inappropriate content

Just before I left for Nigeria last year, I remember a series of meeting I had with Brady Forrest and Nishant Dani about this project. The meetings were mainly exploratory but proved interesting enough that I actually moved my trip out a few days so that Brady and Nishant could get all their questions answered before I left the country.

It's almost a year later and the project is a lot further along with some nice hiring coups such as getting Betsy Aoki on board. Unfortunately once Yahoo! Answers shipped I realized that whenever Windows Live QnA got out the door people would call it a "me too" offering. From Mike Torres's post about Windows Live QnA I see that Jeremy Zawodny of Yahoo! did just that in his link blog.

Right now, I think the question and answer offerings from the various big search providers (Google Answers, Yahoo! Answers and Windows Live QnA) will need to significantly change the game to distinguish themselves. So far the main differentiator between Yahoo! Answers and Google Answers has been price (it's free). However we'll need to kick things up a notch for Windows Live QnA.

There is definitely a lot of room for improvement in this space. I can't help but remember the Web Search History: Before Google Answers and Yahoo Answers There Was "Answer Point" From Ask Jeeves post from the Search Engine Watch blog which outlined some of the tough problems in launching a user-powered Q&A service in a mail from Jim Lanzone, Senior Vice President of Search Properties at Ask Jeeves. He wrote  

I commend Yahoo for joining sites like Wondir in trying the free model again. Beyond the obvious issues like spam, I can share a few challenges with community-driven question-answering that we experienced.

First, as a free service, there was little incentive for people to answer other people's questions. I think the dynamic of question-answering is/was different than other user-generated content. With user reviews, like those found on Amazon, TripAdvisor or Citysearch, people are playing "critic", a long-standing model from newspapers and magazines. With Wikipedia, participants are creating specialized content, in one centralized location, for the masses to consume. With De.icio.us and Flickr, tagged items are made public, but the initial motive is borne at least somewhat from self-interest: organization of bookmarks and photos. With question-answering, on the other hand, it takes a true good samaritan to spend the time to provide answers to one-off questions for people you don't know. (And an even better samaritan to perform this good deed repeatedly, over time, for free.) Meanwhile, if you do it for ego, your answers get lost in the system pretty quickly. So neither motive was that compelling. We observed that only a small group of "experts" took the time to answer questions for others.

Secondly, if not enough people provide answers, then you can't answer enough questions. This is a problem when search has such a long tail of queries, as we showed at Web 2.0. Most searches are unique. This is why search engines are so useful, even though relevance is far from perfect: we can cast a very broad net.

The notion of waiting for an answer is also in conflict with one of the biggest user needs in search: speed. Most things that people search for are things they want an answer to, or a solution for, almost immediately. In theory people will put in more effort to get a better answer, but in practice they seldom do. For example, 30% of users surveyed say they want advanced search, but only 1% of them ever use it. The same thing applied to AnswerPoint. It was usually just faster and easier for people to search normally, iterating on their searches, than to submit a question to the community and wait for an answer.

Lastly, there's the reason we created Smart Answers in the first place: people like to search from one box. Getting them to head to a different part of our site for results is always an uphill battle for any engine.

These are all issues the Windows Live QnA folks are aware of and are looking at innovative ways to tackle. It seems they are already going down the right path of tackling the third problem with the promise that Windows Live QnA will be an integrated aspect of Windows Live Search.