Microsoft CEO Steve Ballmer tried to present his company’s underdog position in search — and in mobile — as opportunities “to grow” in remarks at Silicon’s Valley’s Churchill Club. But he added, “I don’t like not being number one” in his interview with VC Ann Winblad.

Ballmer in the conversation addressed a wide range of issues, from problems with Windows, to online advertising and search to the future of mobile. He predicted massive growth in the smartphone market but contended that RIM (the US market leader) and Apple’s iPhone (the innovator and market maker) would ultimately become niche players.

Ballmer compared the smartphone market today to the PC market in 1983. He argued that the “separation of hardware and software” (as on the PC) would be a key success factor. The difference now is that there are several players conceptually right there with him — Android most notably.

Windows Mobile badly lags the iPhone and now Android’s user experiences. And failure to develop a more competitive user experience and software marketplace might put Windows Mobile in the category it predicts for Apple and RIM. In the enterprise, RIM is far outpacing Windows Mobile in the current market.

It seems also that Microsoft is still pining for Yahoo as a potential solution to its search problem. In a provocative bit of news VentureBeat reports that Microsoft is readying a secret plan to buy a merged Yahoo-AOL should that deal actually take place. That plan is probably DOA from an anti-trust perspective, however.

In still more Microsoft news, the Seattle Times reports on a new bonus structure in Redmond in which high level executives, including Mr. Ballmer, stand to make up to $20 million per year individually.

Arguably the biggest tech news this week was the launch of the G1 (Google Phone) from T-Mobile. It’s been generally well received. Then yesterday came revelation of a new mobile-related patent filed by Google that describes a dynamic telecommunications marketplace and devices that are able to move freely between networks. The idea is both to open up the mobile marketplace — consistent with Google’s Android and FCC auction participation — and provide continuous Internet access.

Speaking of which, Google’s Vint Cerf joins the crowd at Google blogging in honor of the company’s 10th anniversary. In his prognosticating post he predicts:

In the next decade, around 70% of the human population will have fixed or mobile access to the Internet at increasingly high speeds, up to gigabits per second.

If you wish, your mobile will remember where you have been and will keep track of RFID-labeled objects such as your briefcase, car keys and glasses. “Where are my glasses?” you will ask. “You were last within RFID reach of them while in the living room,” your mobile or laptop will say.

The Internet will transform the video medium as well. From its largely programmed, scheduled and streamed delivery today, video will become an interactive medium in which the choice of content and advertising will be under consumer control. Product placement will become an opportunity for viewers to click on items of interest in the field of view to learn more about them including but not limited to commercial information.

Power distribution grids, for example, will become a part of the Internet’s information universe. We will be able to track and manage electrical power demand and our automobiles will participate in the generation as well as the consumption of electricity.

A box of washing machine soap will become part of a service as Internet-enabled washing machines are managed by Web-based services that can configure and activate your washing machine.

The parts of this vision that depend on passive monitoring and tracking of user behavior may meet with political opposition if the mood in Congress is any indication. The growing concern over behavioral targeting and tracking initiatives among ISPs is what prompted AT&T and Verizon to take the position that they, as ISPs, will do no tracking or targeting without the explicit permission of their users:

AT&T and Verizon, two of the nation’s leading Internet service providers, pledged yesterday to refrain from tracking customer Web behavior unless they receive explicit permission to do so.

I’ll end this column today with a Fortune magazine article on comScore, the Internet measurement firm that — in the words of the article’s title — “everyone loves to hate.” Despite the title it’s a generally upbeat profile of the firm.

Related Topics: Search Biz