I remember a time when rumors about Microsoft buying Macromedia were circulating, it was obvious why they would want to buy Macromedia, Flash was THE rich interactive web application standard, and it was beginning to dominate online video as well.

As someone who suffered a lot with the Flash studio (being a programmer and not a designer or animator) I was happy with the idea of getting that side of Flash fixed. If there's one thing the folks at MS know how to do well, it's their dev tools and the support for this tools.
Flash was felt limited to me, both in the way you had to develop for it and in the way you communicate with the hosting page or the server.
You had to do very complicated solutions for very simple tasks.

When Adobe ended up buying Macromedia, I was disappointed, another designer's company meant the environment and tools won't get much better.
I was surprised MS didn't try to get flash until they revealed their own solution for RIA, online video and animation. I guess they also didn't like a lot of things about flash and decided to simply create their own plugin and it was called WPF/E, at least until the PR guys woke up and renamed it Silverlight.

I haven't worked with flash for a couple of years, and I'm sure a lot of the things that were bothering me were solved, maybe, but recently someone tried to convince me that Silverlight was terrible and had no chance of besting Flash.

So this is what I see as advantages for silverlight:

• Use JavaScript to write you client side code. the upside here is big, every web developer (should) know JavaScript, there's no need to learn another programming language or work with another set of tools. this also means the same developers can do the standard javascript programming, AJAX programming and RIA programming but it also means integrating silverlight into your AJAX apps should be easy.
• Silverlight 2.0 adds support for .Net on the client side. This means a lot of things including better performance, support for other languages (C#, Ruby, python, VB.Net, etc...). This also means all the .Net developers can now work on RIAs, so it's not only those who know JavaScript.
• XAML. Having an XML based format means you can very easily generate it on the run, on the server side or on the client side. If you need to customize a page based on database results or if you want to allow users to create XAML snippets and add them to a page, it's all just xml and should be pretty easy to do. This also means other tools for creating XAML should be available from 3rd parties (like the export plug ins from illustrator and flash)
• Video using wmv. I never liked FLV, the quality is bad and I just didn't see any reason for it to exist (remember, when it came out we had quicktime, wmv, and real media videos)
• Microsoft is behind it. This puts the flash has 98.5% install base claims to bed, at least for me. If it was some new, small, no-name company, it would've been hard, even with a better product, but I'm pretty sure MS will make sure it's on every computer and it looks like they learned from their mistakes, instead of just making it part of an update you must install or shipping it with windows, they're getting big content providers to use it. After the summer Olympics, when NBC will be using Silverlight to broadcast thousands of hours on the internet, I'm sure a lot more people will have the plug-in installed (and no, silverlight won't cause a crash, the media servers might, but that has nothing to do with silverlight).
• Silverlight is available for IE, FireFox, and Safari on the Mac (and at least on FireFox it works well for me). Another lesson learned by MS. No linux support from MS, but I think there's a plug-in in the works by someone else (ehh, who cares, it's not like a lot of the RIA users will be using linux anyway, they don't like pretty things...)

As with previous Microsoft efforts, when they show up late, they learn from others' mistakes and make a better product.
This happened with .Net, which basically took JAVA and did it the right way, or C# which eliminated a lot of problems VB, C++, JAVA and JavaScript had, and now with Silverlight.

I've only played around with SilverLight for a few days, but it's such a better experience compared to working with Flash and I have to say that as a team leader I like the fact that my team members, who all work with .Net and JavaScript, will be able to learn silverlight programming very quickly.