Microsoft says that the price Yahoo is asking is not one that they are willing to pay.
It formally dropped the deal and won't be trying to pursue any hostile takeovers either.
So Yahoo gets to stay independent as it wanted.
But some people have questions, what's Yahoo going to do now.
More here
Microsoft abandons Yahoo bid, rebuffing higher sale price - Yahoo! News
Yahoo - Webmaster Forums in Directory Junction
Here's an interesting one here
Microsoft's $40 Billion Question - Forbes.com