The modern browser makes an appealing client for Web-based applications, but even browsers like Safari 3.1 that incorporate features of HTML 5 and CSS 3 have limitations that keep them from competing with native .Net and Java desktop applications. In those areas where a browser falls short, such as video and audio playback and local file access, the developer must resort to a plug-in that is not fully controlled by the browser script, or ugly call-outs from script to native code. Browser-based applications can't be packaged or signed for consistent and safe installation, and the "click to launch" capability that users expect from native applications can only be approximated. When you're running a browser-based app locally, there's no mistaking it for native software.
It's also high time we recognized how dreadful browser plug-ins really are. Plug-ins integrate with the browser's object tree only as well as they choose to. They take over whatever drawing region you set aside for them, and what happens inside that area is entirely in the plug- in's control. One page that has a mix of HTML, Flash, and QuickTime content has three separate processes running three separate rendering paths to a single window. The burden on system resources is enormous, and I can't bring myself to imagine what adding Silverlight to the mix would do.
There is every reason to trust Adobe and AIR to carry Internet-enabled desktop applications to the next level. As a Web developer from way back, I'm excited about AIR's limitless possibilities for responsive and creative desktop apps. And the openness that Adobe invested in its solution will bring about a delightful consequence: An explosion in the worldwide library of well written, great looking applications.