Jean-Louis Gassée had it right at the Microsoft anti-trust trials over embedding IE in the OS.
He has something like (I do not remember the exact quote); It's the application barrier to entry. If there aren't enough users of the operating system, developers will not write applications for it. If there aren't enough applications for it, the users will not chose it.
That being said, as a user of Linux, Windows and OS X over the years, I see what is limiting Linux adoption as three things. In no special order:
Microsoft Office
Gaming
Photoshop
I know there are solutions to all three factors here, but those are the reasons.
"It's the best thing since professional golfers on 'ludes." -- Rick Obidiah