Microsoft had a head start in the smartphone software industry, but companies like Apple (AAPL) and Google (GOOG) have increasingly made Microsoft's (MSFT) Windows Mobile look out of date.

So we're happy that Microsoft has made some progress in its user interface and Web browser for Windows Mobile 6.5, which CEO Steve Ballmer showed off today at the Mobile World Congress in Barcelona.

We haven't gotten a chance to see it yet, but Gizmodo says it "looks great."

You'll notice a honeycomb home screen, an App Store, better touch gesture controls, some screens that look like a Zune, and a physical "Start" button on all new phones. We don't see anything about multi-touch, stellar built-in maps, or any multimedia features that would get someone to buy a Windows phone instead of an iPhone. But we'll hold off final judgment until we see a few examples.

This isn't Windows Mobile 7, the big new version that Motorola (MOT) is mostly holding out for. But if Windows Mobile 6.5 can tide over handset partners like HTC and LG until then -- LG is a making a particularly big bet on Microsoft -- that's good news for Microsoft. Windows Mobile had gotten so bad that phone makers like HTC have been going through the trouble of making their own user interfaces so consumers didn't have to use the Windows part as much. So any progress made on Microsoft's end is good news.

Why is this so important?

Smartphones are the main growth area in the mobile industry, and Microsoft is in the beginning of a next-gen platform war with Apple, Nokia, Google, RIM, Palm, and others. If Microsoft gets left behind, it's in trouble. And indeed, Microsoft's market share has slipped: Windows Mobile had a 11.1% market share during Q3 '08, down from 12.8% in Q3 '07, according to Gartner's most recent stats.

This new version should help. But it'll also depend on what Apple, Google, RIM, Palm, and others come out with this year.

Photo: Gizmodo