Microsoft's Windows Azure team rolled out last week another bunch of updates and new features for Microsoft's cloud platform. Buried among the announcements was a new virtual-machine agent component that may become key to Microsoft's evolution of Windows Azure.

A quick Windows Azure history recap: Although Microsoft initially launched Azure as a platform-as-a-service (PaaS), focused on bringing developed-from-scratch apps to the cloud, Microsoft later added an infrastructure-as-a-service (IaaS) capability to its platform to try to increase its appeal. Thanks to IaaS, users could take their existing Windows Server and Linux apps and run them in VMs on Azure.

One of the myriad Azure updates Microsoft announced on February 20 was the innocuously named "VM Agent and Background Info Extension." As Microsoft Cloud & Enterprise boss Scott Guthrie explained in a blog post, this new agent is for IaaS virtual machines that "over time" will provide the same kind of managed functionality to VMs as currently exists in Windows Azure with Web and Worker roles. The new VM agent can be used to install and manage extensions, which are software modules that extend the functionality and manageability of a VM.

"Over the next several months you'll see us deliver many new extensions that you can optionally enable within your virtual machines," Guthrie said.

Late last year, during an interview I had with Azure Technical Fellow Mark Russinovich about the future for Windows Azure, he outlined in broad terms Microsoft's plan for blurring the lines between IaaS and PaaS with Windows Azure. At the time, I didn't really understand the significance of what he told me, but now I'm starting to grasp Azure's future direction (I think).

"Today, there’s a line between IaaS and PaaS. A definite line between compute and storage," Russinovich told me. "We don’t have our agent integrated into VMs that will let you (blur the lines)."

He noted that while most server apps in IaaS expect persistence, that's not the case for VMs, or instances, in PaaS. Russinovich said he could see a day when the "two VMs to become the same thing, with just different knobs turned on."

Is this blurring a big deal? Yes, according to Mark Eisenberg, Vice President of Strategy and Technology with Boston-based Incelligence, Inc.

Today, there's a definite line between the fully-automated Azure PaaS environment and the do-it-yourself IaaS one, Eisenberg said.

Each compute role in Azure PaaS includes a small piece of software, refered to as an agent, that communicates with the Azure Fabric Controller, which is the heart of the Azure cloud OS. This agent facilitates the fully automated control of the compute instances (startup, shutdown, health monitoring, relocation, etc.). But the Infrastructure Services VMs do not have this agent -- at least not yet, Eisenberg, a former Microsoft employee, explained. Once they do, Microsoft may be able to bring more of the benefits traditionally accrued by those writing/rewriting their apps to work on PaaS to those hosting their apps in IaaS.

"Microsoft will provide the building blocks for customers to be as integrated with the control system as they want to be," Eisenberg said.

The VM agent wasn't the only new deliverable the Azure team delivered last week.

Microsoft also delivered a public preview of ExpressRoute, which is its latest ofering for cloud-/on-premises network connectivity. ExpressRoute, codenamed "Golden Gate," offers users private and dedicated network connections that don't use the Internet. (Microsoft also a secure VPN connection using IPSec tunneling -- Windows Azure Virtual Network (codenamed "Brooklyn") to connect on-premises datacenters to the Azure cloud. Microsoft officials are touting ExpressRoute as providing higher throughput, lower latency and higher security than connections over the public Internet.

Microsoft is partnering with Equinix, AT&T and Level3 to deliver ExpressRoute.

The team also rolled out a preview of Hadoop 2.2 cluster support for Microsoft's HDInsight service; backup and restore for Windows Azure Web Sites; PhoneGap support for Azure Mobile services and other enhancements.