An evolutionary perspective
Microsoft's Windows is a ubiquitous name in the world of computing. With its different flavors, the Windows OS exists on almost all the available computing platforms and devices. Two popular Windows families are Windows CE and Windows XP. Fig. 1 gives an idea of the platforms and devices targeted by these operating systems.

Fig. 1: Microsoft has an operating systems for just about every type of device. Windows XP for PCs is just the beginning. Source: http://msdn.microsoft.com/mobility/letters/
While Windows XP caters to the OS needs of devices with more processing power, memory, and other resources, Windows CE (Compact Edition) is the operating system of choice for resource-constrained devices ranging from embedded industrial controllers to handhelds to home entertainment devices.
The evolution of Windows CE
The standards-based Windows CE platform is an entirely new operating system, completely different from the Microsoft PC operating systems. It's built from the ground up to make possible new categories of business and consumer non-PC devices that can communicate with each other, share information with Windows-based personal computers, and connect to the Internet. The first version was released by Microsoft in 1996.
Microsoft Windows CE, in its current shape, is an open, scalable, 32-bit operating system. It has been designed to meet the needs of this broad range of intelligent devices ranging from enterprise tools such as industrial controllers, communications hubs, and point-of-sale terminals to consumer products such as cameras, telephones, handhelds and home entertainment devices.
With Windows CE, Microsoft provides an open, standards-based platform that significantly lowers the hurdles for original equipment manufacturers (OEMs), hardware manufacturers, software developers, and ultimately, customers to adopt new non-PC technologies and solutions. In the next part of this section we discuss a brief evolution of this operating system.
Windows CE 1.0 was the first version of this new operating system and had a similar look and feel to Windows 95. It was first used in "Handheld PCs" and shipped with scaled down versions of Excel, Word, Internet Explorer, and Outlook. It also had support for terminal emulation as well as PPP for Internet e-Mail and Web browsing.
The successor for this operating system came in the form of Windows CE 2.0 around 1998. It supported Intel x86 chips with enhanced features like 24-bit color, LAN connections, MFC/C++, ActiveX, and VBScript, printing over infrared and serial connections, demand paging of FAT volumes and support for handwriting engines. It was also optimized to support some real-time applications
The next version, Windows CE 3.0 was out in 1999 with support for object-based communications technologies like COM, DCOM, and RPC (Remote Procedure Call), graphics and sound features like those on the other Windows with DirectX support, greater responsiveness and major kernel enhancements.
Microsoft Windows CE .NET is the successor to Windows CE 3.0. It is a robust, real-time operating system for rapidly building the next generation of smart mobile and small footprint devices. Windows CE .NET works on four major CPU architecture families and on over 200 CPU types, and is used in a broad range of device types including: PDA (mobile handheld), Windows Thin Client, Smartphone, Web Pad, Internet/Media Appliance, Set-Top Box, Residential Gateway, Retail Point-of-Sale (POS), and Industrial Automation Device.

The evolution of Windows CE over time.
Pocket PCs and Windows CE