MS research has produced a lot of stuff that is directly used in games today. Hugh Hoppes research on vertex cache optimization and SHPRT has been a shipping part of the DirectX SDK for years for example. Recently MS Research published a paper that greatly reduced Kinect latency that is likely to make its way into games and other applications.

I'm not as aware of other research to product transitions, but I imagine a lot of MS research's work has moved to .NET (I think F# might have started as a MS Research project?) Microsoft Research is one of the strongest divisions right now, they produce a lot of cool stuff, practical or not.