It already does, it's called the Microsoft Store. Apps from there are auto-updated by the system.
Reading between the lines on this announcment, it sounds like a plan to uncouple the mechanism of msix/appx and Windows packages from the policy of the App Store.
WinUI3 (if anyone ever bothers to use it, including Microsoft) already distributes its library dependency this way, as a store package.
>(if anyone ever bothers to use it, including Microsoft)
I think this is a large part of the problem, within the range of applications MS offers there's range of ways they get distributed, installed and managed. Will office use it? How about visual studio, teams, various windows components? It'd be more 'sit up and listen' interesting if MS committed to using it themselves, showed it works for a range of use cases and was great at doing it.
Office has long been the special case inside Windows Update (or Microsoft Update in the years where the brand changed whether you had Office installed or not), since the earliest days of Windows Update. Windows Update started as Office Update in the Office 97 era before becoming an out-of-the-box Windows thing in Windows 98, as I recall it. (The internet doesn't seem to have images of the Office 97 "Office Update" tool, so either my memory is foggy or it truly was short-lived enough that the general internet and Wikipedia have forgotten it.) In Windows 8 and 10 Microsoft tried to move Office updates into the Store and were mostly successful just about the time that the Office team decided they were bored with the Store and moved back "home" to Windows Update (or Microsoft Update, I suppose, if you insist).
If Office is no longer the special case in Windows Update and more applications can use it, that would be interesting. A lot of third party drivers have already been using it more, and that also seemed a special case before. Opening it up as a platform for any third party seems like a long time coming.
(Visual Studio is an interesting case, too, because some of it has always had security updates in Windows Update, but yet more of it is not updated that way than is. Originally the border lines were "owned by Windows components" versus "Visual Studio owned components" but those lines have become so blurry, especially in the .NET 5+ era where Windows no longer owns anything about .NET, but Windows Update still serves critical security patches.)
You've been able to use MSIX outside of the MS Store for years.
Also, the App Store "policies" have been hugely relaxed for years and allow general Win32 apps with no more sandboxing than usual from any other way of installing the app.
Doesn't this include limitations on what the software can do?
Not in several years, no. MSIX, since it was renamed that, supports nearly the full gamut of MSI (just specified in XML directly instead of an ancient, deprecated Microsoft JET database file format and modern ZIP instead of the ancient Windows CAB archive format), and classic-style Win32 apps can be installed with no more of a sandbox than is usual from a raw MSI install rather than an MSIX install.