Summary: Microsoft are disabling WebDAV access to all accounts. This means Hotmail Pop Links, Outlook Express and Windows Mail (the email software included in Vista) access to accounts will stop working at the end of June 2008. You should download all your Hotmail email ASAP and tell people to stop using your email address as soon as possible.

For many years, Microsoft has provided external access to accounts via a protocol called WebDAV. This is the protocol FastMail uses on the Options -> Pop Links screen to allow downloading of email from accounts. It's also the same protocol that Outlook Express uses to access accounts.

In 2004, Microsoft said they would be disabling or charging for WebDAV access to accounts. It seems that what happened at the time is that they disabled WebDAV access for newly signed up free accounts, but left it for existing accounts.

Since then, Microsoft have changed to using a new protocol. Rather than offering an open and standard protocol such as POP or IMAP, they're using a new one they call DeltaSync for their and new accounts. This protocol is not an open or standardised protocol. It's a Microsoft proprietary one and only works with their Windows Live Mail, Vista Mail and Outlook Office Outlook Connector (update: in Vista, the software is actually called Windows Mail not Vista Mail, and it doesn't work with the new protocol).

There's been no documentation anywhere on how the protocol works. We spent some time trying to reverse engineer the protocol, but got stuck at the proprietary compression system they're using. Others have also tried to help, but I don't yet know of anyone that has successfully reverse engineered it.

Microsoft have now announced that they will be disabling WebDAV access to all accounts from the end of June. This means that apart from the web interface and the above 3 2 programs, there will be no way to access your email in accounts.

Update 17-June-2008: It appears there has been a large outcry about the disabling of WebDAV access, and Microsoft have decided to NOT disable access at the end of June. However I wouldn't expect this to last forever, as the linked update notes:

From the feedback we received, it became clear that you needed
additional time to evaluate alternative solutions
and with this in
mind, we are postponing the transition deadline previously announced. 
This means that you will continue to be able to access your Windows
Live Hotmail accounts from Outlook Express beyond the June 30
transition deadline.

[My emphasis added]. So clearly they still plan to disable WebDAV access, and move to their proprietary DeltaSync protocol. We recommend that you should still be planning on how to move away from Hotmail. Once they turn off WebDAV access, you'll be locked into using Microsoft's proprietary protocol that only their software can read. You won't be able to freely access your own data using open standard protocols and systems.