Microsoft Live Labs spent a lot of time in the public eye last week, between the Wednesday release of its Thumbtack online collection tool and the Saturday debut of its Seadragon Mobile application for the iPhone.

It's all part of the plan. Nearly three years after it was formed, Live Labs is hitting its stride with a steady stream of new projects. In the process, the group appears to be accomplishing one of its primary goals -- making the Redmond software giant more nimble online.

Part of its secret: Applying successful models from the world of startups and venture capital.

"We’re at this point where you’re seeing a much more sustained output from the lab, which is consistent with our original vision," said Alex Daley, group product manager for Microsoft Live Labs. "Whereas last year it might have been every few months that you saw output, now you’re going to see output every few weeks. That’s the rhythm that we've been striving for and building toward."

To be sure, the company's broader Internet mission hasn't yet been accomplished. Microsoft's online unit remains unprofitable. And despite gimmick after gimmick, the company has struggled to gain any traction at all in the critical area of Internet search.

But as evidenced by the past week, Live Labs is at least helping Microsoft stay buzzworthy in an Internet-focused tech world.

Live Labs, led by former Yahoo Research head Gary William Flake, was formed in January 2006. It bridges Microsoft Research and the company's product groups, often bringing together people from those disparate worlds to work on projects together. Other divisions inside Microsoft have since created similar labs of their own, following the Live Labs model.

The core Live Labs team numbers around 100 people, Daley said, but the overall Live Labs initiative is more in the range of 200 when counting people from research and product teams. There are three types of Live Labs groups:

Applied Research: Small groups, akin to garage-style startups, with two or three people working on one or more ideas.

Engineering: Groups of five to seven people, akin to seed-stage startups, working with a fixed amount of funding. Projects are evaluated every six months to see if they warrant more time and funding. Daley likens the model to that of Y Combinator, an investment firm that places small bets on Internet companies.

Incubations: Larger groups, perhaps 10 to 20 people, who work for one to two years on a much larger vision.

Live Labs' most high-profile incubation so far is Photosynth, a high-tech online tool for uploading and browsing collections of photos as three-dimensional scenes. After a long stint as a technology preview, the program was released in August for public use.

At the core of Photosynth is Seadragon, the same technology behind the iPhone application Microsoft released this weekend. The Seadragon team inside Live Labs also has released projects based on Ajax and Microsoft Silverlight online technologies.

Other current Live Labs projects include Web Sandbox, which aims to make sites less vulnerable to problems in third-party gadgets and scripts.

Live Labs also delved into the area of news and blogs with the Political Streams project, which analyzed new coverage and online commentary during the presidential election. Political Streams was decommissioned last week, but the underlying Social Streams technology is expected to continue on, to be applied to other areas.

But no matter the pace of its projects, Live Labs ultimately may be judged by whether it can help Microsoft in the areas where the company is struggling most online.

Search is Exhibit A. And with Microsoft's search division funding some of the positions inside Live Labs, it promises to be an area worth watching as the group moves into its fourth year.