Windows 95 was Microsoft first consumer hybrid 32bit OS. While many of its internals were 16 bit, and a significant amount of it was based on the older Windows 3.1, Windows 95's capabilities surpassed those of say Windows 3.1 with Win32s.
Windows 95 was able to execute threads, shipped with TCP/IP, and had a variety of 32bit drivers. However for compatibility it could 'fall back' and use various 16 device drivers.
95 was limited to the FAT 16 filesytem, so partitions could not go beyond 2 gigabytes. At the time Windows 95 shipped this was not an issue however late into the Windows 95 life cycle this started to become an issue, that was resolved with FAT 32 in Windows 98.
Microsoft also started to sell addons for it's consumer operating systems starting with the Plus Pack! that included Internet Explorer and various system enhancers in the form of better disk compression, a system agent (think of cron) and themes.
Windows 95 was also popular for replacing the aging Program Manager with the new Explorer shell.
It is worth noting that this was the most significant upgrade ever delivered into the PC market place. The transition of going from the 16 bit environment of Windows 3.1, to a 32bit environment has allowed for a far greater user experience. This is because of the combination of faster CPUs and larger memory spaces.
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