Generally they don’t care, they want you in the ecosystem. I don’t know if they explicitely label it as free, but you can download an ISO, install it, and log in and I believe you’re good to go now. Or if you have any Windows 7-10 key I believe they are honored. (Someone call me out if I’m wrong, it’s been a while since I installed Windows). But I don’t think they care at all anymore, I think it’s been more about bringing people into their platform.

What’s better for Windows? a 1 time purchase of $99 or give that away for free then charge $150/year for Office?

Haa been for decades iirc. Windows is free, but customization features are locked behind a license. I remember my dad’s Windows XP being unlicensed, and the biggest issue was just a notification in the bottom corner.