The software can be downloaded now from the Microsoft web site, and will be pushed out as on option via the company’s Automatic Updates service next month.

The new version works on Windows XP with Service Pack 2 installed, as well as Windows Server 2003 Service Pack 1 and Windows 64-bit Edition. A version with Windows Vista-specific features will be released inside when the operating system ships to enterprises next month.

One new addition Firefox users will be pleased to see is tabbed browsing. Users will be able to have multiple web pages open at the same time in one window, reducing task-bar clutter.

The interface itself has also been cleaned up, so users can devote more of their screen to the page they are looking at and whatever toolbar or widget plug-ins they choose to install.

On the subject of toolbars, because IE7 now has web search built into the interface, users may find they no longer need an extra toolbar from the likes of Google or Yahoo. Users can choose which search engine is used, and the default is whatever they had set in IE6.

Unlike Firefox, there’s also a built-in RSS reader, so users can view their feeds as web pages. There’s a zoom feature and improved printing support, Microsoft said.

Web developers, now accustomed to having to test their pages against more than one browser for compatibility, will be disappointed to know that while support for web standards such as CSS has been improved, it is still not complete.

Microsoft said it has implemented CSS support for the features that developers have said are most important to them. This means better handling of DIV tags, and ironed out bugs in fixed positioning and hovering, among other things.

On the security side, the company says it has eliminated some IE6 legacy code that could have led to exploitable vulnerabilities being found. It has also added malformed URL blocking and some detection of cross-site scripting attacks.

Perhaps the biggest functionality-security trade-off comes in Microsoft’s decision to turn off potentially vulnerable pre-installed ActiveX controls by default. Now, if a site tries to call an ActiveX control, the user will be prompted before the control will run.

There are also a number of improvements aimed at countering phishing, the increasingly popular and crafty tactic of spoofing web sites in order to steal credit card information from users.

The phishing filter compares URLs that users attempt to visit to a local list of legitimate sites and, in a feature almost certain to cause a privacy scandal at some point in the future, to a Microsoft-hosted web service. Yes, IE7 sends most of the URLs you visit to Microsoft.

While IE7 is currently only available in English, the browser does support internationalized domain names — web addresses registered in non-ASCII characters — which is good news for speakers of, for example, Chinese or Hebrew, and for the domain name registrar industry itself.

IDN support could lead to a new type of phishing attack. Such attacks have been reported before. Phishers register a domain that looks exactly like paypal.com, for example, but actually uses different Unicode code points — the letters look the same to the user, but not the browser.

But Microsoft said it has implemented a feature to stop this. It will display IDNs in their ASCII transcoding, which all starting with the string xn--, unless the user has their browser configured to use the Unicode language the domain is meant to use.

All this security talk comes after over two years of Patch Tuesdays, the monthly Windows patching day that almost always includes a fix for a gaping security hole in IE6, which has helped the rival open-source browser, Firefox, eat up some serious market share.

Some estimates have Firefox adoption at about 12% to 14%, others have it as high as 27%. Meanwhile, IE usage has been reported as being as low as about 75% or 62%, having once been as high as 92%.

The IE7 feature updates, many of which have been borrowed from Firefox, are surely proof, if it were needed, that decent competition has spurred innovation in the browser market.

However, early reviews of IE7 still have Firefox the better browser.