Gates did throw a few jabs at the "free software" community, which is most likely a reference to the open source community. He said that "free software can do some good stuff, but not the really good stuff." He also said that the open source community would have to deal with compatibility problems, once it gets an installed base.
Given how open source software is increasingly accepted in corporate environments, the comment about open source lacking an installed base is only accurate if you compare the desktop versions of Linux and Windows. In the case of Linux versus Microsoft's server operating system, the open source code is gaining an installed base and is already having to deal with the compatibility issues today. But he's right that Linux could suffer from incompatible distributions as vendors mix and match components and system tweaks.
