SCO's predecessor bought some Unix rights from Novell in the mid-1990s, a few years after Novell bought the rights to AT&T Unix. Now SCO claims it owns the rights to all Unix, while Novell says SCO doesn't even own the rights to the intellectual property it's suing over.
Enter IBM. SCO claims that without IBM's infusion of proprietary Unix code into Linux, the Linux revolution would not have happened. SCO further claims that IBM performed this infusion to undermine commercial sales of Unix. As yet, SCO has failed to point out a single line of code that is proprietary.
Of course, Microsoft's dreams came true when SCO filed this suit. Its only chance at maintaining a major presence in the data center over the next few years is to convince us that Linux is not ready for prime time. So Microsoft offered a few million dollars and bought a license from SCO.
This helps SCO (and the lawsuit) stay solvent. And if SCO wins, Microsoft is licensed to use the intellectual property in question. Regardless, Microsoft is helping to fund activities against what Redmond officials have called the "open-source cancer," but Microsoft doesn't have to play the bad guy.