WPF (Windows Presentation Foundation) is a MS .NET framework to build desktop/browser application. As the name indicates, WPF is to display content in interactive manner, like 2D, 3D, audio, video, etc. Normally, WPF application can be compiled in desktop or browser mode without much code change: because WPF browser application uses XAML (not HTML) to display content.
WPF is based on DirectX. So if you want to write a high-performance application (e.g. 3D game), you had better use DirectX, not WPF. For other cases, WPF will be your choice for next generation Windows development.
The advantage of WPF is that application can take advantage of user's computer resource (memory, CPU, harddisk, etc), and easy to deploy without installation. The latter is the biggest reason why web sites are so popular.
The disadvantage of WPF is it requires .NET 2.0 and WinFX platform on user's computer. So it is limited on Windows machine.
To solve that problem, MS is developing WPF/E (everywhere). It has subset features of WPF (without 3D support), but it can run in IE, Safari, or Firefox. It also uses XAML for content layout.
WPF/E need a small plugin inside browser to run application. WPF/E application includes XAML and .NET (C#, VB.NET) compiled library (IL). For this reason, WPF/E runtime includes a simplified version of .NET framework (~200KB)
WPF/E is much better than Flash in both feature and development.
Hopefully, we can try those technology this year :)