They first embraced web standards by building a web based open source IDE called VSCode to get people to convert to it over using Visual Studio.
Now that they attracted people to use it, they embraced Linux containers and offered managed dev containers as a service over it called Codespaces running all on Azure.
At this point, it's all good, this is how a company profits on open source and standards.
But now they are extinguishing by adding proprietary remote extensions, see https://code.visualstudio.com/docs/remote/faq#_why-arent-the...
Those extensions being proprietary will lock you to VSCode and their own containers. As a user you might still use it for free, even though they may add future premium features see: https://code.visualstudio.com/docs/remote/faq#_will-you-char...
But other competitors will not be allowed to use them to compete, and they can't be bundled in anything else, so Sublime wouldn't be able to bundle them in or make use of the remoting features.
The remote extensions are key to the attractiveness of VSCode for use with cloud managed containers, so it's a pretty big differentiator.
On top of that, they purchased GitHub, where most open source software lives, and are now trying to move development on those open source projects to adopt their own proprietary extensions to offer contributors a way to quickly contribute using VSCode and GitHub Codespaces.
Sounds like EEE to me. Maybe it will fail to extinguish, but my guess is we will see a lot of people slowly relying more and more on proprietary extensions owned by Microsoft to the point where if you work for certain companies you might not have a choice but to use VSCode.