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Take a look at Photosynthe from Microsoft. Its a development project and you can watch a demonstration on You tube or somewhere else. This might explain why they would be interested in Flickr, and using the data on Flickr to drive the models created from Photosynthe.
Pete
I think we'll eventually see this coupled with Virtual Earth (similar to Google's Virtual Earth, but I would argue better). The virtual earth could begin to look very real and even more real as more people upload photos to the internet. As more pictures are taken and uploaded, photosynthe can use more data from the web to drive the data in Virtual Earth. Virtual Earth would be a system for making money via advertising as everyone would look to it for information (maybe web 3.0, 4.0,...??) I don't think they are looking to have really accurate scanning/reverse engineering apps come from photosynthe. I see no reason why they would kill Flickr. In fact if something like photosynthe could really take advantage of Flickr, then I would think Microsoft would try to improve and promote Flickr.