The new version, 3.1, is aimed at Windows Mobile phones, earlier versions having been developed for the Nokia Internet Tablet. The new version was developed in parallel with the other. (The natural habitat for real Fennecs, like this fellow, is Egypt.)
But how can this help Microsoft, given that Mozilla is committed to developing versions for a wide variety of mobiles, including the Google Android and Symbian?
The answer is extensibility.
Because Fennec is designed to support multiple extensions, there is an incentive for Windows Mobile designers to produce high-capacity phones. Usually phones are designed to handle only those applications pre-loaded onto them, since they can be tossed after a year or so.
Extensibility can lead to durability, and once you're making a durable phone you're really making a mobile Internet client, not a phone. Your design requirements change and you really are competing with the iPhone.
Another important point is that the business model has to adjust. When you're building something durable you're building something that lives beyond the typical phone contract.
Breaking the SIM card monopoly inside all phones becomes an important design consideration. Now you are freed from carrier control.
By embracing extensibility, durability, and freedom from carrier control, Microsoft can buld an ecosystem around the Fennec browser that will make it truly competitive again, and a business with which it will be far more familiar than it is with today's mobile phone business.
This assumes, of course, that Microsoft embraces the design attributes of Fennec and designs for users, rather than carriers.
But wouldn't it be ironic if an open source projects saves Windows its blushes?