Microsoft is making much of the performance benefits flash memory brings to Windows Vista. Two items on the performance features page utilise it; ReadyBoost as an extension to the RAM and ReadyDrive as a large hard disk cache - part of hybrid drive technology.
Hybrid drive hard disks cache frequently used data in flash memory attached to the disk. Surely this just means the operating system is cached so why then don't we just go the whole hog and give the OS its own flash drive to run from? But wait, we can go further than this, Office Live removes the need for having Office installed on a local disk. On a lot of home PCs that is the only application installed.
We still need a hard disk for bulk storage of documents, media etc but a NAS over gigabit ethernet can potentially have an access time of 125MB/s which is comparible to a local hard disk. We've reached the point where the only people who need a hard disk are those who rely on consistant real-time access to disk i.e. audio and video editing and the like and these folk tend to use firewire disks anyway.
Processor, RAM, a load of Compact Flash and maybe an optical drive is all that's needed - hopefully it's not going to be long until desktop PCs look like this: