Is Windows Azure actually the next release of Windows Server after Windows Server 2008 R2?
No. Windows Azure is a cloud operating system delivered as a service that is separate from Windows Server. Windows Azure is a scale-out platform service that provides customers with on-demand compute and storage to develop, host, scale, and manage applications in Microsoft® data centers. Although Windows Azure, Windows Server and System Center products have different development organizations, they are on parallel code paths and actively sharing new innovations developed by Microsoft—such as Boot-from-VHD and Microsoft’s new application server technology Windows Server AppFabric.