Mary Jo Foley writes about Why Microsoft deserved to lose the OOXML standards vote. She does a good job of clarifying the issue for me - the proverbial layperson:
In spite of the rhetoric on both sides, Microsoft wants OOXML to gain ISO standardization so that it won’t lose out on government contracts that require “open,” standards-based products. Microsoft’s competitors don’t want Microsoft to obtain ISO standardization because they see this loss as a chance for them to finally lessen Microsoft’s 90-plus-percent market share in the desktop-productivity suite business.
I've also read a lot of comments about how Microsoft's current specification is in quite dodgy shape technically speaking. Many people are of the opinion that the standard was rushed and that it was not written with interoperability in mind at all. For some more technical criticism of MS's proposal, some people are pointing to the Danish complaint's listing (pdf document).
Now this was only a vote on fast-tracking approval of OOXML. Microsoft needed 2/3 of the votes and only received 17 out of 32 votes. But it's not necessarily the end of the story. MS can get another vote in March after it addresses technical questions posed by some of the voters. It may very well win that one. And only adding to the political drama is Microsoft's apparently unethical lobbying tactics.
With Microsoft owning so much of the commercial market share in office apps, you might doubt the importance of such an ISO standard. But then again, Redmond seems to be going to great lengths to have it go their way.
It will be interesting if they lose out in the end. They're already embattled with Google on several fronts, watching Apple hit home run after home run, trying to get to grips with an increasingly open-source world, battling Linux on the server side, and finding a few manufacturers now offering pre-installed Linux systems on the desktop...
Geez, I'm almost starting to feel bad for them...