Why has Microsoft started giving away so much software?

The short answer is ECO-SYSTEMS and FREEMIUM services. Here is a link to a good article at The Verge where they discuss how Microsoft will make money on "free" software. It is an interesting insight that we have long ago left the era when "speeds & feeds" sold hardware and when companies could charge premiums for behemoth (aka MS Office) software that would locked users into their brand and product. 

Our computing lives have become so mobile that, for many, what is most important is easy access to our "stuff" from anywhere on any device. Who would have thought that Microsoft would release a version of their office suite on Apple iPads before they released it for their own surface tablet. The good news is that this shows us Microsoft is turning the corner to the new reality of the computing world.

Again, check out the full article at The Verge, it is a quick read but certainly insightful.