Microsoft is offering a FREE service called "Windows Live Custom Domains", in which they will provide e-mail services to your domain.
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With this service, administrators can create and manage an unlimited number of user accounts, each with a e-mail storage space of 2 GB.
The e-mail interface is that of Hotmail, which means that the user does not need to familiarize himself with new user interfaces. You can also configure customizable features such as a company logo and more.
You can use these accounts for Windows Live Messenger and other services on the MSN and Windows Live network.
Since all email is stored on Microsoft's servers, small businesses do not need to buy server hardware, operating systems and e-mail server software, plus they save the cost of maintaining and troubleshooting their e-mail servers. One would also assume that this data is stored on such hardware that allows for redundancy and fault tolerance, thus saving more money for the client.
Google's equivalent is called "Gmail for your domain", read more about it on the Host your Domain E-mail with Gmail For Your Domain article.