If Web authors actually use this feature, and if IE doesn't keep losing market share, then eventually this will cause serious problems for IE's competitors — instead of just having to contend with reverse-engineering IE's quirks mode and making the specs compatible with IE's standards mode, the other browser vendors are going to have to reverse engineer every major IE browser version, and end up implementing these same bug modes themselves. It might actually be quite an effective way of dramatically increasing the costs of entering or competing in the browser market. (This is what we call "anti-competitive", or "evil".) [source]
If they go with their current plans, Microsoft will be attempting to redefine "standard" as "what IE7 does", and everything else as an extension that needs to be opted into. They feel entirely justified in doing so because from their perspective, IE's market-share makes it the standard.