Earlier versions of Internet Explorer used inline autocomplete, but newer versions use drop-down autocomplete that requires you to press the down-arrow key to select an item from the drop-down. Why the change?

Because it interferes with normal keyboard operation.

Suppose http://www.microsoft.com/windows/ is in your history, but you want to go to http://www.microsoft.com/. As you type the desired destination, inline autocomplete kicks in and fills in the remainder of the URL for you, http://www.microsoft.com/windows/. If you aren’t watching the screen and just hit Enter, you end up going to the autocompleted URL instead of the URL you typed. Oops.

To me, this is a fatal flaw, namely that one has to be watching the screen to perform an operation that one would think consisted purely of typing. In particular, this creates problems for people with limited visual capability who necessarily “type blind” most of the time.

Even using Tab as the autocomplete character suffers from the same flaw. Consider the Run dialog or IE’s address bar. In those places, the Tab key moves you around the window. (To the OK, Cancel, and Browse buttons on the Run dialog, or into the web page itself for IE.) If the Tab key were the autocomplete completion key, it wouldn’t be possible to Tab around the dialog/window any more. For example, suppose you want to browse around your C drive, so you type C:\ into the Run dialog and hit Tab three times to get to the Browse button. But, oops, the Tab key autocompletes, so instead of browsing C:\, you’re browsing whatever directory in your C: drive the autocomplete engine decided to show you.