BARCELONA — Microsoft is prepping a major update for Windows Phone 7, bringing multitasking and a mobile version of Internet Explorer 9 to the mobile operating system.

The update, vaguely scheduled for “later this year,” was demoed today by Joe Belfiore, Microsoft’s vice president of Windows Phone.

The biggest new feature is multitasking. Like iOS and webOS, it manifests itself as fast-app-switching. Press the “back” button flip to the last-used app, or press and hold to enter a switching screen. This is a lot like the webOS “card” metaphor crossed with Apple’s cover flow: you flip through shrunken screenshots to get to the app you want. It’s neat and, in the beta build I tried out, fast.

When you re-enter an app, it resumes instantly. The demo showed Belfiore flipping between a couple of games, and entering right where he left off. This feature is open to third-party developers.

Another feature will be familiar to iOS 4 users: Background audio. Just like with iOS, you will now be able to run any audio app as you juggle different activities between apps.

Office for the phone is pretty self-explanatory, but more interesting is the inclusion of Microsoft’s cloud-storage service, SkyDrive (above). Users will get 25GB of online storage that is deeply tied into both Windows on the PC and the phone. It is shameful that Apple doesn’t offer the same already.

And then there’s IE9. Current Windows Phone 7 handsets ship with a mobile version of the four-year-old IE7, and IE9 is the latest version of Microsoft’s browser. IE9 for Windows Phone 7 uses the same rendering engine as desktop IE9, so sites will look as good (or bad) in both places.

Better news is hardware acceleration for graphics and video. This hands-off processor-intensive work to the GPU, or graphics processor. This speeds up the performance to a quite remarkable degree.

The skeptical might say that the demo animation, which shows many, many fish swimming on screen, shows typical Microsoft thinking: throw better hardware at poor software to make it run fast enough. But in this case, the Windows Phone team has it right: squeezing extra work from the GPU helps performance and battery life.

Microsoft has already set a fairly high GPU specification in its minimum hardware specs to take care of its Xbox Live integration. This means even current phones can benefit from the update.

This update is a solid one, and shows that the Windows Phone team is doing what Apple and Google are already doing: quick, small iterations in the OS to bring rapid improvements, instead of the monolithic juggernaut approach of desktop Windows.  It looks pretty good. Hopefully — with the help of Nokia — maybe people will actually start to buy the phones.

Photos: Charlie Sorrel/Wired.com