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Microsoft bundled its web browser with Windows 95 to take market share away from Netscape. It intended to use it's operating system monopoly to create a Microsoft monopoly for web browsers.
An internal memo the Microsoft turned over to the Department of Justice supports this. In the memo, a Microsoft executive says that Internet Explorer could not beat its competition based on its features alone and that MSFT would need to "leverage the Windows asset." (I don't have the full quote or name of the executive handy yet.)
MSFT "integrated" its web browser with Windows 98
to circumvent a consent decree that states MSFT can not 'bundle'
products but
Despite it's many claims to the contrary, MSFT did realize that bundling Internet Explorer 3.0 with Windows 95 was illegal. MSFT realized that IE was a bundled product and not an integrated one. While MSFT was saying that IE was integrated with Win95, they were busy making changes to actually integrate (a newer version of) IE into Win98.
MSFT did it fast enough that by the time the government wised up, Win98 was only a few months away from its release date.
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