Omar Shahine has a blog post entitled Hotmail + Outlook = Sweet where he writes

At long last... experience Hotmail inside of Outlook.

What used to be a subscription only offering is now available to anyone that wants it. While Outlook used to have the ability to talk to Hotmail via DAV it was flaky and 2 years ago we no longer offered it to new users of the service.

Well the new Outlook Connector has a few notable features that you didn't get with the old DAV support:

1. uses DeltaSync, a Microsoft developed HTTP based protocol that sync's data based on change sequence numbers. This means that the server is stateful about the client. Whenever the client connects to Hotmail, the server tells the clients of any changes that happened since the last time the client connected. This is super efficient and allows us to offer the service to many users at substantially lower overhead than stateless protocols. This is the same protocol utilized by Windows Live Mail. It's similar in nature to exchange Cached Mode or AirSync, the mobile sync stack used by Windows Mobile Devices.
2. Sync of Address Book. Your Messenger/Hotmail contacts get stored in Outlook.
3. Sync of Calendar (currently premium only)
4. Sync of allow/block lists for safety/spam

I've been using the Microsoft Office Outlook Connector for a few years now and have always preferred it to the Web interface for accessing my email on Hotmail. It's great that this functionality is now free for anyone who owns a copy of Microsoft Outlook instead of being a subscription service.

PS: Omar mentioning Hotmail and Microsoft Outlook's use WebDAV reminds me that there have been other times in recent memory when using RESTful Web protocols swept Microsoft. Without reading old MSDN articles like Communicating XML Data over the Web with WebDAV when Microsoft Office, Microsoft Exchange and Internet Information Services (IIS) it's easy to forget that Microsoft almost ended up standardizing on WebDAV as the primary protocol for reading and writing Microsoft data sources on the Web. Of course, then SOAP and WS-* happened. :)