The Macworld Conference & Expo, Silicon Valley’s largest technology trade show, opens Monday. But the moment everyone is waiting for comes Tuesday morning, when Steve Jobs makes his annual keynote address at San Francisco’s Moscone Center.

Jobs has set a high bar for himself. At Macworld 2006, he introduced the first Intel (INTC)-based Macs — sparking a burst of sales that nearly doubled Apple’s (AAPL) market share from roughly 4% to something approaching 8% (link). At Macworld 2007 he unveiled not just the all-but-forgotten Apple TV, but also the iPhone — a device that in nearly everybody’s book turned out to be the machine of the year.

What can Jobs do to top that?

There’s no shortage of speculation. The Apple rumor machinery has grown so elaborate that for the second year in a row, Ars Technica’s John Siracusa has published a keynote Bingo card (available in PDF format here and in iPhone format here), with boxes to be filled in as Jobs makes his announcements, introduces his guests and trots out his trademark rhetorical flourishes. (The rules of the game are spelled out here.)

Nobody has yet shouted out “Bingo!” in middle of a Steve Jobs presentation — a moment brilliantly anticipated in IBM’s buzzword Bingo TV ad (link) — but this could be the year.

Some of Siracusa’s boxes are obviously more important than others. A couple (Mac Pro and Xserve) were preemptively filled last week, and there are a few key possibilities that he missed. Watch especially for:

• A Skinny MacBook. Probably the leading candidate for Jobs’ one-more-thing moment, it’s already been named — Macbook air, thin, nano and mini — and imagined in PhotoShop (see here, for example) by bloggers who should know better. Likely specs: 12 to 13-inch. LED backlit screen, under 3 lbs., half as thick as today’s MacBooks, 32, 64 or even 128GB solid-state flash drive, priced around $1,600.
• iPhone updates. A bump in capacity from 8GB to 16GB and maybe 32GB is expected, as well as a preview of the software developers toolkit (SDK) promised for February; we might even get a few demos from developers, like EA, who were seeded with the SDK last fall. A 3G iPhone and a Newton-type tablet are reported to be in the works, but not yet ready for prime time.
• Movie rentals. This is the item Hollywood is following most closely. It’s been widely reported that Fox and Disney are likely to make movies available on iTunes for overnight rental (at $3 to $5 for 24 hours) or for purchase for roughly the price of a shrink-wrapped DVD. If, as rumored, Paramount, Lions Gate and Warner Bros join them, the flood of fresh video content could breath new life into the Apple TV. (The Associated Press reported Sunday that Netflix (NFLX), anticipating such a move by Apple, will offer unlimited monthly video streaming.)
• DRM-free Music. Having famously championed the cause with his February 2007 Thoughts on Music memo, it would be surprising — and disappointing — if Jobs did not use this opportunity to announce a significant expansion of the DRM-free offerings in the iTunes Store, especially after the last of the major labels announced last week that they were putting their music on Amazon.com (AMZN) without copy protection.
• Microsoft (MSFT) Office 2008. No surprises here, since the reviews are already in, but an excuse for what should be the most lavish after-hours party of the show.
• The Beatles. It’s about time. Just in case, Yoko Ono’s John Lennon Educational Tour Bus mobile recording studio is making the trip from its Las Vegas unveiling at the Consumer Electronics Show to be at Macworld. A few hours after Jobs’ speech, there’s a press reception in the bus that’s co-sponsored by Apple.

You already see the flashbulbs popping, right? But is it enough? Apple’s marketing machinery is like a shark that must keep swimming or die. Even if nearly every square on the Bingo card were to be filled on Tuesday, would Jobs have delivered the kind of innovation and buzz the faithful have come to expect?

And then there’s Wall Street to consider. Apple was the high-flying tech stock of year, its share prices having more than doubled in 2007. But as a CNNMoney headline put it on Friday, “What’ve you done for me lately?” The stock fell nearly 30 points over the last two weeks, which could be taken as a measure of traders’ uncertaintly. (Or it could just be a well-timed pause to set up the Macworld effect, the short-term bump tech share prices often enjoy after a Steve Jobs’ keynote.)

No matter how high the bar, Jupiter Research analyst Michael Gartenberg is confident that Jobs will clear it. “This is a company that thinks in terms of strategy,” he says. “Do I think they’ll deliver something as disruptive as the iPhone? No. You don’t achieve that kind of disruption every week; it would be tantamount to getting into a whole new industry. But somehow Jobs always manages to meet expectations, even if the expectations are different.”

To find out how different, tune in Tuesday for Fortune senior writer Jon Fortt live blogging from the keynote at fortune.com/bigtech, video coverage from CNNMoney.com and our post-keynote analysis here on Tuesday afternoon.

There are few things Steve Jobs loves more than a dramatic Macworld surprise announcement, but three weeks before his annual keynote speech, someone - my guess would be Rupert Murdoch - just stole his thunder.

Several sources this morning - including the Financial Times and the Wall Street Journal - are reporting that Apple (AAPL) and News Corp. (NWS) have struck a deal for a new video-on-demand service that could change the way digital movies are distributed, viewed and paid for.

Citing an unnamed “person familiar with the situation,” the FT reports that the two companies signed an agreement that would allow customers to download the latest 20th Century Fox movies through the iTunes store and watch them for a limited time. No pricing details were available, but earlier reports suggested that Fox and Apple were talking about charging $2.99 for 30 days viewing. That’s considerably cheaper than competing services from BlockBuster and NetFlix, neither of which work with iTunes, Macs or iPods.

In addition, Apple is reportedly extending its FairPlay digital rights management system for the first time to another company’s product. As part of the same deal, Fox will sell its new releases on FairPlay DVDs that permit customers to transfer, or “rip” the content to a computer or video iPod. As the FT points out, there is software available to rip movies today, but using it is considered piracy and can land you in jail.

Disney is the only other studio that makes new releases available on iTunes, but only to buy, not to rent. Paramount, Metro-Goldwyn-Mayer and Lionsgate sell older library titles. But the tide may be turning, and Apple is reported to be in talks with Sony, Paramount and Warner Brothers.

“Fox and potentially other ­studios are coming around to the idea that there is nobody out there to challenge iTunes,” Jonathan Weitz, a principal with IBB Consulting, told the FT. “This deal is a sign that media mobility is coming to the mainstream.”

The best instant analysis of the deal this morning is on Silicon Alley Insider, where Dan Frommer seems to have stayed up all night trying to work the angles. See his winners and losers column here and his six questions here. Among the latter, our favorite is No. 6:

How will Blockbuster, Amazon, Netflix, Microsoft, Sony, cable, telco, and cellphone companies, and other rivals respond? Apple’s iPod line dominates the portable media player market, and the iPhone is taking a big chunk of the smartphone market. And now, it appears, there will finally be digital rentals compatible with Apple’s gadgets. Surely Jobs’ rivals haven’t been sitting around doing nothing. How will they fight back? Lower rental prices? More portability/less DRM? This should be a fun one!

Warner Music Group CEO Edgar Bronfman, Jr., who once likened Napster to slavery and Soviet communism, made headlines today with a mea culpa in which he confesses that he — and the music industry — was asleep at the wheel. (see below)

The billionaire song-writer and sometime Broadway and Hollywood producer (who inherited a fortune from the House of Seagram and lost much of it) even had kind words for Apple (AAPL) — despite launching verbal grenades at the company and its CEO for more than two years.

A few choice quotes from Chairman Edgar:

Sept. 25, 2005. Responding to Steve Jobs’ complaints that “greedy” music companies were fighting 99¢ song pricing:

There’s no content that I know of that does not have variable pricing. Not all songs are created equal — not all time periods are created equal. We want, and will insist upon having, variable pricing.

We are selling our songs through iPod, but we don’t have a share of iPod’s revenue. We want to share in those revenue streams. We have to get out of the mindset that our content has promotional value only. We have to keep thinking how we are going to monetize our product for our shareholders. We are the arms supplier in the device wars between Samsung, Sony, Apple, and others. (link)

Feb. 9, 2007. Responding to Jobs’ call for lifting DRM (i.e. copy protection) on music:

The notion that music does not deserve the same protections as software, television, films, video games, or other intellectual property simply because there is an unprotected legacy product available in the physical world, is completely without logic or merit.

We advocate the continued use of DRM in the protection of our and our artists’ intellectual property. The issue is obscured by asserting that DRM and interoperability is the same thing. They are not. To suggest that they cannot co-exist is simply incorrect. (link)

Nov. 14, 2007. At the GSMA Mobile Asia Congress, asking for help selling songs via cellphones:

We used to fool ourselves…We used to think our content was perfect just exactly as it was. We expected our business would remain blissfully unaffected even as the world of interactivity, constant connection and file sharing was exploding. And of course we were wrong. How were we wrong? By standing still or moving at a glacial pace, we inadvertently went to war with consumers by denying them what they wanted and could otherwise find, and as a result of course, consumers won. (link)

For years now, Warner Music has been offering a choice to consumers at Apple’s iTunes Store the option to purchase something more than just single tracks, which constitute the mainstay of that store’s sales. By packaging a full album into a bundle of music with ringtones, videos and other combinations and variation we found products that consumers demonstrably valued and were willing to purchase at premium prices. And guess what? We’ve sold tons of them. And with Apple’s co-operation to make discovering, accessing and purchasing these products even more seamless and intuitive, we’ll be offering many, many more of these products going forward. (link)

According to AppleInsider, the Bronfman went on to praise Apple for its “beautifully designed” iPhone which includes “brilliantly written software.” It has a “spectacular user interface” that “throws all the accepted notions about pricing, billing platforms and brand loyalty right out the window.”

Full text of Bronfman’s speech available here: EBJ Macau 3GSM speech FINAL 11-07.pdf

Two days after Apple (AAPL) began cutting the price of its DRM-free music for new customers, from $1.29 a song to 99¢, the company is still charging the higher price for existing customers.

The fact of the 30¢ price cut was confirmed yesterday by Steve Jobs, although the company denied that the move was in response to competition from Amazon (AMZN), which charges 89¢ to 99¢ per song, or Wal-Mart (WMT), which charges 94¢. “It’s been very popular with our customers, and we’re making it even more affordable,” both Jobs and spokesperson Natalie Kerris insisted.

But the price cut was not applied across the board. The discrepancy arises in the Upgrade My Library feature, which is still charging existing customers 30% extra for DRM-free songs.

For example:

A new customer who buys Norah Jones’ Feels Like Home on iTunes pays $12.99 for a 256 kbps, DRM-free version of album. That’s the same price existing customers paid for a 128 kbps, DRMed version when the album first came out. To get the higher-quality, iTunes Plus version through Upgrade My Library, those customers have to shell out an extra $3.86.

Of course, there is no competition for Apple’s Upgrade My Library feature. It’s the one thing you can’t do at Wal-Mart or Amazon.

However, Amazon sells a DRM-free, 256 kbps MP3 version of Feels Like Home for $8.99. They also sell the “Enhanced” CD for $12.97 new and $6.47 used.