Microsoft’s new Windows Live Application Based Storage API is a RESTful API.
More info is here.
Why did they choose not to support WebDAV?
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WebDAV is for managing files on a remote server, but perhaps is not generic enough for what Microsoft was trying to accomplish.
There’s also a lot of hype around REST lately and they are probably in competition with S3 from Amazon which offers a REST API.
It would have been good of them to provide their RESTful API as well as WebDAV.