.NET is Microsoft's attempt to save the sinking ship. The Internet, along with it's standard protocols, are a danger to something as proprietary and closed as Windows. So, Microsoft is "betting the farm" on the concept of "software as a service." They are attempting to leverage XML technology such as SOAP with Windows, in order to keep Microsoft an industry leader for at least the next five years.
IMHO it's all a hack. They don't have much to show right now. If any other company came out with this design they would be ignored. Microsoft has the power to manipulate the media and they are doing so. By all indications, in the best case, .NET is at least two years away.
C# is another programming language. It is for people who are too cool to code VB and who don't feel like dealing with C++'s complexities. As a programming language it is very bland. It really offers nothing new to the development world. It borrows heavely from Java but at the same time it offers features that make it as confusing and dangerous as C++.
The thing to look for if you are developing Windows software is the Common Language Runtime (or something to that effect). This is going to be a set of COM libraries that you will be able to use from any of the Visual Studio 7.0 languages (VC++, C#, and VB). They also claim that ANY programming language, all the way down to COBOL, can use the CLR. The MSDN site has some info on this.
Take it all with a grain of salt. This is Microsoft talking. It's 90% marketing, 10% technology.