Microsoft has announced that WinFS will not be shipping in the foreseeable future.
The file system was originally slated to be part of Windows Vista, but was pulled from the new OS. It was then going to be released as an add-on to both XP and Vista, but now that plan has also been dropped.
Whilst Beta 1 of WinFS was released last year, Beta 2 has been canned. It seems like the whole project was just too ambitious to be pulled off, although much of the end-user functionality that WinFS was due to provide to Vista will still be there, to some degree.
WinFS was going to provide an object-oriented, database driven access layer to the NTFS file system. Effectively, it would mean developers could do all sorts of cool things with database-like queries of the file system.
Most users are not likely to notice the difference. OSX-style searching of content on a user's hard drive will now be achieved with MSN's desktop search tool, rather than through the elegant file interface. Microsoft has said that elements of WinFS will be incorporated into a future version of SQL Server.
There's an interesting piece on the history of WinFS, going back to 1991, over at Ars
Give us your thoughts on desktop search, file systems and WinFS over in the forums.