It's all about money... The key piece of this is RESIDUAL income for Microsoft.
Part of it is obviously a way to control piracy - you can't bootleg what you can't have - but the bigger part is making a user not just "pay to play", but to pay on a recurring schedule. KaaaaaChing$$. This is the same reasoning behind leasing automobiles - the Dealer can make money once on the lease and then again on the subsequent sale.
The convienince part of online software is that it is more convienient for MS to bill you annually than to try to entice you into making a major purchase on the bi-annual release of thier latest and greatest... MS is a marketing machine - NOT a software producer. The software is secondary to the money.