Azure Cloud Switch is an operating system, which is based on Linux, that Microsoft has created for their data centers. This software will be installed on their network appliances, such as switches, to let them control the features that their data centers require. It also helps them interface hardware together, since they now control the software stack regardless of hardware vendor.
This is naturally making tech websites doodle on their calendars as the company uses Windows for just about everything. While basing a portion of their infrastructure in Linux is a sign that Microsoft is embracing open source, this is not the first time. Back in 2003, which is not a Linux-friendly year for the company, Microsoft used Linux-based infrastructure from Akamai to provide DDoS and malware protection. It worked. They have even been attributed as a top contributor to the Linux kernel in the past.
The OS is internal to Microsoft, but it is in affiliation with the Open Compute Project. I'm not sure if we will ever see the OS or its full source publicly.