How Internet Explorer
By bundling the browser with the OS, OEMs are forced to drop Netscape Navigator from their packages (having two browsers installed on the machine increases the chance of a call to technical support, and therefore lowers profit margins). Those OEMs that don't buy this (Microsoft-originated) line of reasoning are then threatened with having Windows taken away from them altogether (or in Apple's case, Office). The quality of the actual browser software is irrelevant as the consumers do not enter the financial equation, but by dint of massive promotional expenditure, new features are added and bugs fixed (probably to spare the sanity of the legions of tech-savvy Microserfs who are now forced to use it, rather than as part of any conscious quality control policy).
Internet Explorer can be removed from Windows9x. This results in a marginal increase in available resources, and prevents lazily-written software (like Napster) from throwing pop-up ads at you. It may also result in increased stability, especially if you have installed IE over an older version of the shell. It also has the effect of breaking Windows Media Player (should you be unlucky enough to have it installed), and numerous other minor features of Windoze that Microsoft have hastily tied it to in an effort to "prove" it is part of the Operating System.
As for how it works, who cares when you can join the wonderfulTM MSNTM today!