Simulation in Microsoft ESP. (Credit: Microsoft)

To answer the biggest question first, this is not the future of Microsoft's consumer Flight Simulator product. Flight Sim's fate remains uncertain following the company's decision to disband the studio behind the long-running and beloved product.

However, it is an example of the core Flight Sim technology living on. Microsoft has reached a deal to license to Lockheed Martin its Microsoft ESP system, which the Redmond company derived from the Flight Simulator project two years ago with an eye toward offering a "visual simulation" platform -- taking the immersive world originally created for Flight Sim and allowing it to be customized for specialized commercial applications.

Microsoft says it will also look to license the ESP technology to other companies to use and offer to their own customers, as Lockheed will be doing. But in deciding to offer the underlying intellectual property for use and development by other companies, Microsoft is signaling that it doesn't plan to further develop ESP itself.

"This clearly was not going to be a core piece of our growth," said David Kaefer, Microsoft's general manager of intellectual property licensing, saying the decision was part of Microsoft's broader re-evaluation of its business priorities in the midst of the economic downturn. "What we decided was that it was a lot better to take the investment, earn some money back but also enable our partners to take it forward and succeed."

Under the licensing agreement, Microsoft says Lockheed is expected to further develop ESP to train warfighters in battle. At the same time, Lockheed's software developers will also extend the technology beyond flight training for use as a general simulation tool by the military and other government agencies.

Financial terms weren't disclosed, but in general such licensing agreements provide benefits to Microsoft when the people who license its technologies see success with the resulting products.