Today was day 3 of the PDC extravaganza. Based on today"s Neowin chat, there seems to be some confusion over WinFS and WinFX.
In short, WinFS is a file system...layer that works with NTFS. WinFX is a managed API designed to replace Win32 and talk to the new Longhorn APIs.
If you want to read more, read this article: PDC Day 3: WinFS and WinFX in real world terms