Hotmail uses a protocol called "http" since it was/is primarily a web based (i.e. uses a browser) email service. However traditional email servers pre-date Hotmail and other web based services. They were designed to handle email with dedicated clients and servers using special "mail" protocols: pop3 for receiving (download and delete from server), smtp for sending, and imap for viewing what is on the server before download. Historically many email services have used these protocols, which is how previous email clients from Microsoft have worked (Outlook Express and Windows Mail). With WLM, Microsoft decided to include the ability to download Hotmail to a client program using http without dropping support for the traditional protocols (pop3, imap) still in use by many other services. So, for those people who get their mail from different providers the WLM client will work with them all.
However, many people prefer not to use an installed client on their device but use the web browser to access their mail from providers that offer a web interface (often called "webmail"). But for each provider you would have to log in to each provider's web interface. What Microsoft has added to their Hotmail website is the ability for you to enter your login credentials for your other mail providers. Since pop3 is the most common type of mail server protocol, you would most likely be adding your pop3 access credentials for the other providers' email services. So now you can continue to use "webmail" w/o a client but go only to Hotmail to view it, identifying yourself only with your LiveID since you have told Microsoft to remember your logins for other email services. Microsoft can now retrieve your mail from the other providers and present it along with the Hotmail.
