Yes, you read that correctly.  Microsoft is going to work with Novell's Mono Project on their Silverlight clone called Moonlight.

With the release to the Web of Silverlight 1.0, the cool new cross-browser, cross-platform technology for developing rich media experiences and interactive applications, Microsoft also released Expression Encoder 1.0 (formerly Expression Media Encoder), a tool for encoding, enhancing, and publishing rich media content to Silverlight. Expression Encoder is an application included with the Windows version of Expression Media that enables you to convert and compress multiple video formats to SMPTE standard VC-1 video for mobile, Web, and HD video scenarios. It also eases production of live events using features such as multisource switching and publishing of content to services including Silverlight Streaming by Windows Live. In addition, Microsoft announced that it will work with Novell to deliver Silverlight support for Linux, in a technology called Moonlight, based on the project started on mono-project.com.

That is just awesome news, and really smart on Microsoft's part.  It will give them more desktops running Silverlight, and that will mean more browsers that can run it.  Cross platform and cross browser are pretty much required for any technology that web developers use these days, and Flash has had it for a long time.  If Microsoft wants to seriously compete with Flash they need more desktop support.  The mono project could give them a huge boost for non Windows machines.

What about the Dot Net runtime in Silverlight?

Hopefully this will mean that the Dot Net runtime in Silverlight will become more robust.  The current implementation is not much more than a proof of concept if you ask me.  The support is so limited as to be non-functional in almost any app other than Hello World. The Mono Project has already announced their intention to make Moonlight capable of running the full Dot Net runtime without all the limits of the current release of Silverlight.  Maybe this will be a case of open source technology pushing Microsoft to up their game a little (we can hope).