Danny Thorpe has a blog post entitled Windows Live Contacts Control Shows Online Presence where he writes

This month's rev of the Windows Live Contacts Control adds a new "tile" view that displays the photos of your Windows Live IM contacts in the control, and makes starting an IM session with them a simple one-click operation.  The top part of this screenshot shows the new tile view.  The bottom part is another instance of the contacts control in list view mode.

This widget can be embedded on a page and used to enable Windows Live/MSN users to view or otherwise Windows Live Messenger buddies or Hotmail contacts. I've been following the development of this widget since the project started and it is definitely getting interesting.