Here's Microsoft's official statement:

Microsoft Corp. today announced that Windows and Windows Live President Steven Sinofsky will be leaving the company and that Julie Larson-Green will be promoted to lead all Windows software and hardware engineering. Tami Reller retains her roles as chief financial officer and chief marketing officer and will assume responsibility for the business of Windows. Both executives will report directly to Microsoft CEO Steve Ballmer.


These changes are effective immediately.

Microsoft Announces Leadership Changes to Drive Next Wave of Products
[microsoft.com]

So he has made a success of Windows 7 and 8 and launched surface tablets that have had a better initial reception than anything MS has done in mobile for years, but he is "not a team player" and they need to get rid of him to have a more rapid release cycle (although he got Windows releases moving after Vista).

The resulting management structure splits responsibility for Windows, with the business side of Windows being run by the CFO, who also runs marketing for MS as a whole!

Exactly Graeme, I can't tell who between Julie and Tami got the worse end of the deal but they seem to be paying for the attitude of a former(successful) employee. Making future hit products without having control of business decisions, and vice versa, means they had always better be on the same page. I'm not sure which position I envy less.

As a customer what do I care about an attitude, I just want good products and that's what he brought to the table!

Who?

I am hearing in the rumor mill that Sinofsky's style was the reason a lot of real talent left the Windows division or Microsoft entirely. I think we'll be seeing more conjecture for a while. They're making it sound like Sinofsky was Microsoft's Scott Forstall.