Hmm. After reading this, my brain went blank :P
What will happen is that Microsoft will release rolling updates that include all patches and new features using the "flighting" technology. New installs will start from a base, then update to the latest, and Microsoft will periodically update the base image to include the recent flights.
#1--which is quite a motivator.
The clincher? Win10 will be the last Windows OS version folks will need to install for the lifetime of the device/OEM PC they buy (which I take to mean "according to manufacturer's support duration.") For people who build their own machines, who are constantly buying new peripherals and components in a never-ending hardware upgrade cycle, it would appear that Win10 will provide them with the most current version of Windows in perpetuity, since some/most of their hardware will always be supported by the manufacturer (especially motherboards.)
The advantage, according to Microsoft, is that when they get new features done they can roll them out *immediately* and consumers won't have to wait 'till the next giant Windows version ships. Also, this will undoubtedly mean some changes in the Windows authorization routines (we may have seen the last of "phone activation" and the like) that will positively affect Microsoft's bottom line and go easier on consumers. I don't think there will be a Windows 11,12, XIII, etc. I think that Microsoft is set for some banner sales, as the larger the Windows installed base, the larger the market for other Microsoft software--and the larger the market for Windows developers (like Mozilla and Google) whose largest markets today are the Windows markets. That's really ironic as heck when you think about it... Weird how some of the wealthiest companies today, whose fortunes and corporations were built largely by the installed Windows base of consumers, are the first to try and can Microsoft...Such is life, I guess.
Microsoft is already making the builds of the Win10 previews available in .iso format, so I think this will continue to be the case at RTM and beyond for Win10. Maybe Microsoft will make an updated RTM Win10 .iso available every quarter or so, but that is just a guess of course. This will be very interesting to watch. I think every aspect of Windows distribution will be affected--from authorizations on down.
It wouldn't be surprise to me too.
But what if somebody decides they don't want a particular update? Say it changes the UI in a way you don't like? If it's optional that's all well and good. But if its not, and you have to apply it to get any further updates/patches, what then? Right now you have people that like 8.1 but don't like 10. If 10 is going to morph into another OS and another OS, at some point there will be some that don't like the changes. Even if they are free.