Google the first to turn a web browser into a UI… nah, I first saw that as a student in the university library the IT people used the new Netscape web browser to launch all of the applications, the computers booted MS Windows and that ran the web browser right away.
Yes, of course. That is why MS is in a difficult situation: the OS becomes less and less important. The only thing important in the future is that the browser runs stable and can handle all contents: text, pictures, sound and video. The OS is ‘just a local technical nuisance’: how the input and output of the hardware (screen, keyboard, mouse and speakers) is connected to the browser. That can be a pretty small OS. And all the rest is done in the cloud.
It has some advantages: low cost (“thin”) hardware, no worries about updates of your software, run everywhere where you have connection with the internet, even with other devices than your own etc. But there are disadvantages too: you must be connected to the internet, you are not master anymore of which software you would like to use, and of course the ‘big brother problem’.
When Microsoft tried to tightly integrate Internet Explorer into their OS, they were sued.
Yes, of course they were. MS totally oversaw the importance of the Internet (which makes some sense because their business was the Personal Computer). Netscape was the standard browser (who remembers Mosaic?), and MS pressed them from the market by delivering the Internet Explorer with the OS, and intentionally mixing it with other parts of Windows so that it could not be removed. Add to that that nearly every PC was delivered with Windows, and it is clear that MS was misusing its market power. Now you can choose: you do not have to buy a Chrome book. Now you can choose to sell your soul to MS, Apple or Google. And do not forget: all the main browsers (Firefox, Opera, Chrome) also run under Linux. There is competition now.