True application development needs to make use of reusable code and components to cut costs and speed delivery time. Having design, HTML, and scripting poured together into one large file makes for poor division of labor. These changes by Microsoft are an attempt to move beyond just browsing the Web and make the browser a true development platform. Behaviors are sure to become the basis for component-based Web development. Microsoft has also included a number of built-in behaviors to IE5 PR2.
State refers to changes such as what was filled into forms or other configurations made to the page.
The HTC file contains the script in either VBScript or JScript. While it isn't documented the HTC file will also take Javascript as a script language. The addition of the behavior property to CSS2 has been proposed to the W3C by Microsoft and is still in evaluation. The example I'm going to show you is used to create easy popout menus. As you can see, the behavior called pop is attached in the style sheet.