The MSN Spaces team's blog has a few entries about one of the projects they've been working on in collaboration with our team. From the posts URL Changes and More info on the URL Changes we learn

All MSN Spaces Users:

Please note that your MSN Space's URL will change on June 5 8, 2006.  As part of investments in the improvement of MSN Spaces, it we will be migrating all of the URLs from http://spaces.msn.com/<NAME> to http://<NAME>.spaces.msn.com.   (For instance, instead of http://spaces.msn.com/thespacecraft/  you will now see http://thespacecraft.spaces.msn.com.)

 On and after June 5th 8th, all viewers and users going to the "old" URL will be automatically redirected to the new URL.
...
Spaces has grown very quickly into one of the Web’s mega services. So quickly in fact that we just passed the 100MM user mark and have had to do some architectural changes to ensure that Spaces can be deployed in multiple data centers. We needed to deliver a system that allows for Spaces to be distributed across multiple data centers without requiring a URL that included the data center name. How unkewl would that be? Can you imagine telling your friends and family that the URL to your space was http://cluster25.dc1.spaces.msn.com/gphipps?

So we have developed a DNS (Domain Name System) based solution that allows us to redirect requests to the right data center and allows us to keep a better looking URL. Moving the Space name into the domain name is a requirement of that.
...
Doing the rearchitecture work and making the move to Live Spaces was not possible for a number of technical reasons. This is why we can’t move straight to the spaces.live.com name. However, we believe that when we do move to Live Spaces that will be the last time we have to change the URL. This really isn’t something we decided to do lightly. We have had to make a ton of tradeoffs from both a technical perspective and the impact to our users.

Converting a service as large as MSN Spaces and it's associated services from a single data center to be able to be deployed in multiple data centers has been a significant undertaking. One unfortunate side effect is that we've had to alter the URL structure of MSN Spaces. Doubly unfortunate is that the URL structure will change again with the switch to Windows Live Spaces.

Although these changes suck, they are necessary to ensure that we can continue to handle the explosive growth of the service across the world as well as pump out crazy new features. Thanks to all our users who have to bear with these changes.