Version 5.0 has some welcome updates, including support for mini hard drives and typewriter-style keyboards.

Where will Microsoft go today? Wherever you would like to go, of course.

The latest version of Microsoft’s operating system for portable devices, codenamed Magneto, debuted yesterday. Bill Gates himself announced the updated OS at Mobile & Embedded DevCon yesterday.

With the arrival of Windows Mobile 5.0 comes the end of the Pocket PC and the Smartphone operating systems. Windows Mobile supports one-button push-to-talk and other features found in modern cellphones.

Mr. Gates told CNN: “The phone is changing and that’s where Microsoft can help out in setting standards, and in providing software, including today’s newly announced Windows Mobile 5.0.”

The Chief Software Architect named Finnish phonemaker Nokia in the interview; Nokia is part-owner of the Symbian operating system, which runs on a majority of the mobile devices in the market today. That will likely change; Microsoft isn’t known for pushing into markets just to have a sliver of the available market share.

Advances like the new operating system underscore the belief held by Microsoft and others that users will want more from their cellphones. Support for small hard drives, already a feature on a couple of new phone models in the market, means people can manage multimedia like songs, photos, and videos.

And support for small typewriter keyboards might be a wakeup call for BlackBerry creator Research In Motion as well. A wider variety of devices capable of handling wireless e-mail may mean fewer hardware sales for the Canadian-based RIM in years to come.

David Utter is a staff writer for Murdok covering technology and business. Email him here.