This is a policy that is a direct result of the M$ "Permatemp" lawsuit. By labor law standards, a Contractor becomes an employee past this time-frame thus eligible for the same benefits as an employee.
Having the Contractor leave and come back is the loophole/workaround for this.
Are these workdays? This would be the equivalent of 5 months. Or are they calendar days, which make it a little more than 3 months?
Do they have to take the break after 12 months of work? Or do they take it every year, making them work 9 months per year (assuming you count the break in calendar days)?
Another question. It sounds like Microsoft contractors have to take a break if they like it or not, so the point is probably not to keep them motivated. What advantage does Microsoft get from this?