Microsoft's Notepad has received updates, including a new character count feature, while maintaining its core functionality as a free application that does not require an account for standard use. Users are prompted to sign in to a Microsoft account only if they wish to access the AI-powered Rewrite feature, which requires a paid Microsoft 365 subscription. The introduction of premium functionalities suggests a shift towards a "freemium" model, allowing basic use without payment, while advanced features necessitate a subscription.