It's not about developer machines, it's about servers. There are are a lot of people who want to run the same OS, and even the same processor architecture, on their development and deployment machines. (I've almost always worked in a cross-compilation world, so this doesn't make a lot of sense to me, but whenever the topic of ARM or RISC-V machines comes up here, it gets a lot of attention.)

But loads of people develop on Windows and deploy on Linux. I would say that is the 'default' approach now for even Microsoft .net core apps; given how supported docker is, and the docker containers run linux?

it's not about weather linux desktop is an issue or serious competition

it's about making sure it can't become one even if MS starts doing things which harm customer (accidentally and/or due to customers being dependent on them).

For example look at the steam deck, even with it's success it's neglible small compared to Switch, PS and Xbox, but it still implicitly forced Microsoft to start working on better support in their "windows manager/desktop US" for this kind of devices.

Or they would love to force their app store for apps like Apple did on Mobile, they tried getting there before. But now they can't really threaten Valve that well anymore because Valve can always argue: See gaming on Linux works without us strongly doubling down on it because you forced us. And there are people invested in Steam due to having large libraries, if most of their library works on SteamOs but Steam works no longer on Windows where would they go...?