Dare Obasanjo points to the inaugural post in the Windows Live ID weblog by Lead Program Manager Trevin Chow which clarifies the objectives of Live ID quite succinctly:
Windows Live ID is the upgrade/replacement for the Microsoft Passport service and is the identity and authentication gateway service for cross-device access to Microsoft online services, such as Windows Live, MSN, Office Live and Xbox Live. Is this the authentication service for the world? No :-) It’s primarily designed for use with Microsoft online services and by Microsoft-affiliated close partners who integrate with Windows Live services to offer combined innovations to our mutual customers. We will continue to support the Passport user base of 300+ Million accounts and seamlessly upgrade these accounts to Windows Live IDs. Partners who have already implemented Passport are already compatible with Windows Live ID.
Hit the link for more details on some of the new technologies in Live ID including Infocards and Web services.
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