Users get 500MB of storage on Microsoft’s servers, where they can store any file they want. Files and folders can be set to public or private access.

SkyDrive is linked into users’ Windows Live accounts and buddy list, so people can share files by uploading to friends’ accounts or allowing friends to upload to theirs.

The service, which could be used for file trading or backup, is free in the beta version. The company is expected to charge a fee for final release versions.

Originally named Live Folders, SkyDrive now also has a drag-and-drop interface to make file management simpler and more in line with how files are moved around on the desktop.

The service will compete with Microsoft rivals in the web apps space, such as Google, and in the security space, such as Symantec.