Microsoft released a beta of Windows Server AppFabric that "makes it easier to build, scale and manage Web and composite applications that run on IIS".
MS has also said that you can deploy AppFabric on your own servers, on a 3rd party host and on Windows Azure.
So far we haven't done any Azure development mostly because the API differs from ASP.NET and you can only deploy your app to the cloud (and not on your own servers).
So if I use the AppFabric API, will that let me create apps that I can deploy in house, at a 3rd party hoster or on the cloud with the same API? Will it be a 'first class citizen' in all of these?
Where does this leave the Azure API - is AppFabric a replacement? What about Azure SQL?
As far as I'm concerned, the main thing that AppFabric offers is what was previously codenamed "Velocity".
Velocity was the original name for Microsoft's answer to MemCached, with the benefit of being written specifically for Windows (with x64 compatibility), and also having better ASP.NET integration.
Microsoft have bundled this with something for "managing software built with Windows Workflow Foundation and Windows Communication Foundation". (A project previously codenamed Dublin.)
Those two projects (Velocity and Dublin) have now been put together and are being sold under the title AppFabric.