I've read a lot of blog posts about Silverlight, and Jeremy Zawodny's Thinking About The Strategy Behind Microsoft Silverlight as well as Don MacAskill's Thoughts on Silverlight are really worth a read to grasp what's going on. Feel free to augment that in the comments.
Meanwhile, while Microsoft may gobble Yahoo!, Google can try one tactic to kill Silverlight in the egg: use DoubleClick to swamp the web with Silverlight-powered ads. That surely killed Flash on the intranet, why not try that trick again? ;-p