"Popfly" is a name that makes little sense to me. Fortunately, the project it represents is something quite unique. As an offering by Microsoft, and currently in beta, Popfly offers something that will become quite big.
Look at all the popular Web 2.0 sites nowadays - Flickr, Facebook, Myspace. These are all sites whose content is written by its members. Without the members input, the site would be worthless. It's like a telephone system, you have one subscriber and the system as a whole is pretty worthless, you have two subscribers suddenly you have someone to speak to, add a few thousand more and voila - you've got a very valuable system that does nothing more than provide the delivery platform for information.
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Popfly takes this a step further. It uses API's exposed by a number of the big Web 2.0 sites out there, adds to it a number of classes ("Blocks") that you simply drop into your screen and link up output -> input. They call this a "Mash-up", and is designed to grab bits of information from all different places and present how you want it to look. Sharing this with your friends or adding it to your website lets everyone have a look and play with what you've done.
The driving technology behind all this is Silverlight 1.0. In the past, Macromedia / Adobe Flash has been the market leader in the online rich-media space; and given they have done quite well out of it, it seems that they have woken the sleeping giant.
Microsoft's Popfly isn't just a mash-up tool to smoosh a view of your information, it's also a very clever way to get their technology into the #1 place. Inviting people to develop and share blocks and sites, and have rankings for "Most Popular" mash-ups is a pretty clear way to get people onto the platform, developing and competing with each other, all for the eventual goal of market saturation with a wide class library. It's kinda an open source thing, but under a corporate umbrella.
So yes, it appears that flash will inevitably be steamrolled by silverlight, with Popfly tightening the noose. Who knows, perhaps we'll now see a whole new breed of annoying flash silverlight site intros.