For those of you who don't know, Blue is the current codename for the upcoming Windows 8 update, which is rumoured to be cross-platform with Windows Phone 8 and RT.
The new video demo, carried out at Microsoft's TechFest event and leaked onto YouTube, shows off some additional features for Fresh Paint, including new watercolour features that let you take a photo and turn it into a painting.
In the video, Eric Rudder, Microsoft's chief technical strategy officer, briefly touches on the update and has a few things to say about some other companies out there:
"If you look at a company like HP now that's kind of struggling and cut their R&D budget, I think they may have wished there's some stuff in the factory they could drop on and sort of renew themselves."
With Windows Blue, Microsoft is planning regular updated to Windows 8 that will "build on and improve" the OS in ways that are more overtly obvious.
"We in general are way more open than many of our competitors," Rudder also added. "We share our successes, we share our failures. And sometimes that makes for interesting stories."
We still don't know when Blue might actually arrive, but considering rumours that Windows updates will now be on a yearly cycle, expect to see it before the year is out.