It all started with the Windows Error Reporting Tool. Microsoft was collecting hundreds of Bugs per day only for its Operating System. Microsft Found out that 70% of all errors and bad user Experience in Windows XP comes from Graphic Display drivers. First, Microsft saw that most of the Drivers used are not certified (WHQL). Secondly, Microsoft also saw that due to the fact that the Graphic Driver runs in Kernel Mode, if it crashes, it brings the entire Operating System Down. So Microsoft said: "Heck! If we solve the only problem that is causing this 70% of bad experience, we would have got a very long way!"
Since they were developing Longhorn(Vista), and one of their top pritority was to bring any change that was possible, Microsoft told Graphic Card Manufactures that now their Display driver must run in User Mode rather than Kernel Mode. Microsoft also worked with Ati and nVidia in order to develop these WDDM (Windows Display Driver Model )Drivers.
While they worked with these specific Graphic Card Manufacturers, Microsoft quickly saw what their problems were in term of building a new Display Dirver Model. Extensive use of "Capability bits" in order to differentiate one Graphic Card to another in terms of features and the overheads in rendering objects. So microsft decided to take out a new version of DirectX 10. In fact they were already going to take a new version out, with the Pixel Shader Version 4.0 the Top newest Feature, but they just added some features which allowed them more control over the Graphic Cards.
The change with WDDM is that now, the Operating System(DirectX 10) is more in control of the Graphic driver than the Driver of the Manufacturer was ever before. What this means, that Microsft is more in control of what the Graphic cards will do, how they must behave, in fact, now with DirectX 10 , it is Microsft and not the Graphic Cards Manufacturers that decide what features will be included in Graphic cards.